Yes, that's the 28-bit LBA limit, and it's a limitation of the chipset in the enclosure. There's an app called Overdrive for OS X that works with large internal hard drives in older Macs, but I don't know if it would work with your external or what issues it might cause.
I'd suggest a 2.5" USB enclosure (they're what, $7?) for a cheap, easy, and reliable way to go.