To use the hard drive as a system drive, you have to format it in HFS or HFS+, s that's the filesystem used by OS X and especially for use with Classic mode if you have a PowerPC-based Mac. NTFS, FAT, and all derivatives of FAT are only for MS-based operating systems.
While OS X can read and write to FAT-based filesystems, NTFS is read only on OS X. The same goes for operating systems like Linux and other open source operating systems. However, if you have a Windows computer that uses NTFS for the filesystem but is sharing out it's hard drive to other computers over a network, Mac OS X can read and write to it since it's using the SMB protocol to share over the network.
Hope this helps.