I need to convert a primary partition into extended one. Is it possible to do with any Linux tool. I would not like to use any proprietary like Partition Magic.

No. This is a restriction in the (DOS) partition table structure - nothing to do with Linux.
I would doubt that PM does it either - especially if you have the partition table fully populated with primaries.

I presume you have "run out" of partitions, and want to create an extended so you can use logical partitions.
You cannot use an extended partition to directly address your data. Using normal access anyway.

If you have 4 primary partitions, you will have to delete one so you can create an extended (there can only be one on a disk). This is true even if you have unallocated space on the drive.
Within the extended "container" you can define logical partitions that you can restore you data to.

thanks for your response. Yes it was what I had to do. The thing is that I was reinstalling everything and only started doing that, having all the data backed up. I created 4 partitions: 2 FAT32 and 2 EXT3 and forgot about swap. So I had to delete my main fat32 partition, luckily I did not have any data on it except newly created Docs & Settings.

The problem now is that I mounted fat32 partition in Ubuntu Live on /media/fat32, but cannot change the permissions to 777. I do not have any problem with ext3 disk which is mounted on /media/backup. I wonder why?

Brain-dead maybe ???.
Ahhh - that was directed at fat file structure, not you ....

No permission bits - look at your mount options; particularly rw and users.

I never have to tell Linux the partition type when mounting a FAT32 partition and have read if this has to be done then use vfat only.

Also all Linux can be booted from a logical partition so it pays to leave the primary partitions for DOS/Windows/BSD/Solaris.