Cannot enable FileVault

I just reinstalled Mac OS X in my mac mini - new hard drive (320GB) and I wanted to try the FileVault feature for once.... but I get a message saying that my home folder is not in a Mac Extended FS.

I checked the Disk Utility and I have only 1 partition formatted with Mac Extended FS (Case Sensitive).

Is there a special setup to enable FileVault? (I'm new to this stuff)

Regards,

 

I just learned this:

"The error is valid. You cannot use a case-sensitive filesystem with File Vault. You will need to convert the drive to standard Mac OS Extended (Journaled.) Unfortunately, this requires reformatting the drive so you will need to make a bootable backup before implementing the change."

So my question now is....

If I use TimeMachine to backup my data.... then reformat my Mac again (now using only Mac Extended fs (without case sensitive), update it and then use TimeMachine to restore the backup will I be alright? Will all my data come back ? (all that I installed in my user and my configurations?) Never used TimeMachine in my life...