Sparse Image on FAT32
 

I'm trying to back up my entire PowerBook G4 to a 640GB MyBook ext drive. I did not partition the drive and it already has other documents backed up to it.

Can I just backup my PowerBook directly to the MyBook as a Sparse Image? I assume the MyBook is a FAT32 volume. The user guide warns:
Note Do not store a sparse image on a FAT32 volume. FAT32 volumes have a 4GB single file size limit, and fail pretty spectacularly when this limit is reached. As with direct-to-disk backups, please erase any FAT32 volumes with Disk Utility, and use Mac OS Extended (Journaled) as the format.

What do I need to do?

No, you can't. You'll have to repartition/initialize the drive so it's properly partitioned and formatted for the Mac. This is a destructive operation that will erase the drive...