So I just got my first Mac. After getting everything set up just the way I wanted it I decided to install Steam. When I opened Steam it said something about not supporting case-sensitive file systems...

I did some googling and found that Steam won't be the only application that gives me this trouble. Photoshop (when I eventually install it) doesn't support case-sensitive file systems either. I'm sure there are other applications as well.

There is at least a work around for Steam, but it involves disc images and symbolic links. Not very fun. It works, but it's not very fun (and Steam is supposed to be all about fun, no?). I am not aware of any work arounds for Photoshop.

So here's my question. Can I boot into the disk utility, format the drive to be case-insensitive, and then restore from time machine? Are there any technical limitations that would prevent me from doing this? I haven't named anything like Folder 1 and folder 1 yet, so I am not aware of any collisions that would show up.

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The Operating System is case sensitive. So if you could magically turn that off somehow I would imagine at the very best you would have to deal with file name collisions. At worst it would just plain be broken. – EBGreen Jan 19 at 19:13
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It looks like you can restore from time machine to a case-insensitive file system from a case-sensitive one. See Apple Forums here.

I would highly recommend that you perform a total system backup using Carbon Copy Cloner.

Carbon Copy Cloner does support restoring to a case-insensitive system from a case-sensitive one - see this.

In fact, I would recommend CCC over TM, but you should use what you feel comfortable with. I would also boot to the CCC image and make sure all my stuff was there before I wiped my internal drive and did the restore. CCC makes a bootable back up (which is another reason it's awesome).

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Just slightly before you posted this I went ahead and started the process knowing that in the worst case I would just have to restore to a case-sensitive file system. I formatted the drive to a case-insensitive file system and time machine is currently restoring and hasn't made a fuss yet. I'll post the end result when everything is said and done. – KPthunder Jan 19 at 20:35
The restore just finished and the restore process turned the partition back into a case-sensitive file system. So it appears time machine will not work. – KPthunder Jan 19 at 21:19
Then I highly recommend you use CCC. – skub Jan 19 at 21:34
Could you elaborate on some of the features of CCC that make it worth using over Time Machine for future reference? – KPthunder Jan 20 at 0:16
You can actually use both on the same drive. You can boot right to the CCC drive and either attempt to recover the Mac with in OS X, or you can clone all the data back to the Mac to rebuild everything. I use both Time Machine and CCC on the same drive. Here is a good post at Apple Forums; discussions.apple.com/thread/2749688?start=0&tstart=0 – skub Jan 20 at 1:12
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I haven't used it, but iPartition claims to be able to do nondestructive conversion between case-sensitive and case-insensitive HFS+.

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