Thanks again Spexx, yes the first thing i did was convert FAT to NTFS prior to using the drive.
For completeness, here is the response that I received from Western Digital support group at WD.com on this topic.
Drive testing was done with no problems found. I am monitoring the situation still, i don't plan on deleting the current partition at this time.
"Its likely a corrupted partition, you will want to backup any data currently on the device and re-create the partition.
You will want to use Disk Management to Delete the current partition and then create a new one using the unallocated space.
Answer Title: How to install, partition, and format an external hard drive in Windows XP and Vista.
Answer Link: http://wdc.custhelp.com/cgi-bin/wdc.cfg/php/enduser/std_adp.php?p_faqid=207&p_created=1008908212
You will want to test the drive for problems using our Diagnostic software.
Answer Title: How to test a drive for problems using Windows Data Lifeguard Diagnostics.
Answer Link: http://wdc.custhelp.com/cgi-bin/wdc.cfg/php/enduser/std_adp.php?p_faqid=940&p_created=1049813869
Also be sure your drive is on a cable that is shorter than 22 inches."