I have been through exactly the same thing, and NTFS is the way to go. My main machine is a Mac, but I format all my USB drives as NFTS (through NTFS-3G FUSE). Though this is slower than formating as FAT or HFS+, it is so much more portable, it wins out. Windows machines can read them. My WD TV box can read them. My Mac can read them. They can store more than 4G per file (indeed, I have all my DVD isos on them). Ok, they can't be read on other macs without installing NTFS-3G, but I've yet to need that. For me, I've never had any problem with NTFS-3G , it's extremely reliable.

I've been using the eee version of Crunchbang. http://crunchbanglinux.org/blog/2009/01/18/crunchbang-linux-81002-released/ Works flawlessly with full driver support, is very fast, and isn't brown.

I've got first hand experience of this. My close friend was accused as part of Operation Ore. He came around sobbing one afternoon, after the police had crashed into his flat at 7:00, searched through all his stuff, took all his computer equipment (which he needed for his work, and contained irreplaceable files) and took him down the station.
That night he slit his wrists.
*Luckily* another friend went round there the next morning, and found him barely alive in a pool of blood.
Since then, after several months of recovery, he's lost his flat and had to file for bankruptcy. And yes, he was one of the victims of credit card fraud.

That's just one of the reasons I've since moved from the UK.
Don't let anyone tell you the UK isn't a Police State - they're too blind to see the reality.