Many external hard disks come pre-formatted in FAT32 format hence they can only take a maximum file size of 4Gb - that's why you get the "insufficient disk/disc space" message even though you have plenty of spare capacity.

Thanks to James for reminding me of the very handy "convert" command which can be used to change the file system type to NTFS without loosing data or needing to reformat. NTFS can accomodate individual files up to two TerraBytes in size.

Note: you will require some spare disk space to perform the conversation.

How to convert the filesystem from FAT32 to NFTS?

The following approach works Windows XP, Windows Server 2003 and Windows Vista.

Run a command shell (cmd.exe) as administrator and then issue the command "CONVERT" followed by the drive letter of the partition you want to convert, then "/FS:NTFS".

You can see the help text below: