I would urge caution using Case-Sensitive, it is unnecessary for Time Machine use and has been known to cause problems with some application because not all developers are careful with their use of case sensitive filenames etc. Apple's recommendation is Mac OS Extended (Journaled).
If so, why is it the default for Time Machine (at least in Lion)? When I plugged in my WD 1TB USB drive, Lion didn't give me a choice, automatically reformatting it to said standard immediately upon my choosing to use it as my backup disk.
