Okay, listen up.
1. I would go internal. It's much quicker in every aspect. Loading games from internal and backing up from disk to HDD is waaaaay to faster with internal HDD. And you won't have to "double copy" - first from PC to ext. HDD, then from ext. HDD to PS3, which would cost time. The only cons I see with internal - is that you have to use FTP to transfer games, which is rather simple and there is a hell a lot of tutorials, but it may be a bit of troublesome. And yeah, once the disk is internal, you can't use it for other means, than in a PS3.
2. For internal - it is only 2,5; for external - both will do, but 3,5 will require additional power, thus requiring to plug HDD into a socket to a wall. I strongly recommend 2,5.
3. About formatting, I reccomend FAT32 too, NTFS is quite raw here, and practically useless outside multiman. If you're on Ubuntu, formatting to FAT32 will be a piece of cake, on Windows you need to have special tool (like fat32format.exe or other), because Windows does not support formating in FAT32 HDD>32 Gb. On Mac only God knows how to format in FAT32, I have no idea, never used it.
4. Which brand? I recomend with the longest warranty. External HDDs have quite a short lifespan if used improperly (unplugging while still spinning, shaking, dropping). I don't know exactly, I once used Hitachi and it was like a piece of sh*t. My girlfriend uses Transcend and it's okay. Brobably go for Transcend too, it has a good customer support.