First thing, if you don't already have SFS you can download it from Aminet here...
http://aminet.net/package/disk/misc/SFSIt's not really possible to explain here just how to set it up, but the docs included with it explain quite clearly just how to install SFS and set it up.
Only thing I would say is make sure the first partition you create is a FFS system partition, cos if you want to be able to boot from this HD then due to the way the Amigas OS works and the way that FASTATA works you really need a FFS partition of no more than 4GB as the first partition in order to be able to boot up from that disk.
There are two types of filesystems you can use with SmartFileSystem, SFS0 & SFS2, I would recommend you use SFS2 as there is no size limit to an individual file with SFS2 whereas SFS0 if limited to just under 4GB per individual file (a bit like FAT32).
Read the docs carefully before you attempt to install and partition you HD. It might look a bit complicated at first but it's really quite simple once you get the hang of it, and it's certainly worthwhile in my experience, no more file size limits and easy to store DVD images on like I do.

Cheers :drink:
Franko