External Drive Backups simply *vanish*

Hello all. I have a MyBook 1-Terabyte external drive, mfgr. Western Digital, USB connected, about 2 yrs old, used for monthly backups. To backup, I simply create a dated folder (like 'Bkup_20110801'), and manually copy my doc- & pic-folders from my PC into that dated folder. The drive now contains about 22 dated backups, with a lot of files, and is a bit over 1/2 full.

But this last time, the newly backed-up docs would vanish before almost my eyes! The Copy completes normally, and I can see the copied subfolders within the dated folder. But when I pop out of the folder and go back in, the subfolders are gone.

What is wrong? Does the external drive have a limit on the number of files or folders it can hold? Note, the file system is FAT32, my Windows OS is Vista, and the manufacturer is Dell. I do regular maintenance and virus/malware scans on my PC (using AVAST, Ad-Aware and other tools). None of the backed-up files are >2G in size.

I am now running a Defrag on the external drive in hopes that this might solve the problem. The defragmentation has been running about about 24 hours now. It probably has a way to go. But I suspect this is clutching at straw.

Please help me save my backups. Thanks.