Don't use the FAT32 method as it limits your files to 4gb it's really outdated now.
I just bought an external hard drive this weekend i'll tell you how i have done it:
What you do is you make on partition in OS X using disk utility that is in HFS+ (Mac Os Extended) make it 250gb (as you have 500) call it Leopard or whatever, then you will have 2 partitions select one and make it "Blank" or "Free Space" can't remember what it's called and name it Windows or whatever, then you plug your HD to Windows, your HD will not show up in Windows, to see it you will have to into :
Control Panel (Switch to Classic view) -> Administrative Tools -> Computer Management and then click on Disk Management on the left. You will then see your Hard drive partitions now, select the partition you have "Free Spaced" and right click on it and select format, check quick format as there is nothing on your drive anyway, it's gonna take 5 seconds and voila, you will see your drive in the main My Computer, and on OS X you will see both partitions except you won't be able to write in the Windows partition.
I have done the exact steps above with a 640gb external HD and it works perfectly.
Consider installing MacDrive on your Windows computer if you need to write on the OS X partition from Windows and install NTFS-3G if you need to write on the Windows partition from Mac OS X.
Hope this helps