How large is your E: drive? Windows 2000 can't format a partition greater than 32Mb using the FAT32 file system.
The Win2K/XP FastFAT driver can mount and support volumes larger than 32 GB that use the FAT32 file system, but you cannot create one using the Format tool. According to Microsoft this behaviour is by design.
See the following Knowledgebase article for more info.
http://support.microsoft.com/default.aspx?scid=kb;en-us;314463
If you need to format a FAT32 partition greater than 32GB, you will need to do it under Windows 98/SE/ME.
If all else fails, repartition the E: drive into smaller drives that fit within the 32Mb limitation.