I'm not sure why FBA would make things any different. You just have to
specify the audience, group, or user(s) that you want to target.

I was thinking it wouldn't make a difference, but the dataview webpart i'm
applying the audience  to is not behaving as expected. I have AD users added
to the Audience, and they are seeing the dataview if they are in the
Audience, but the FBA users are not seeing it. When adding the FBA users to
the audience, i'm using the work e-mail address to map them to the Audience,
since the account name only recognized a domain\username parameter. are
there any other ways to map the user to the Audience?

Bear in mind that I haven't tried this so there could be some vital piece
missing (usually that stuff gets fixed in a patch or something).

Is this a fairly generic FBA implementation? If so, then I assume you have
an extended application which authenticates on the membership provider.
Have you also added the FBA membership provider to the web.config of the
Central Admin site?

If this still doesn't work, you can try audiencing by Group directly in the
web part. You'll need to open the site collection from the FBA (extended)
side of the application and add the users there, since otherwise the people
picker won't recognize them.

There are two possible problems with that approach. First, are you pulling
the work email address from the user's profiles or trying to use it as a
login name? If you are pulling it from profiles, do your FBA users actually
have populated profiles? Second if you are using it as a login name did you
add the Membership Provider settings to the SSP web.config? The audience
compiler is in the SSP and since the membership provider isn't usually added
to that it won't be able to see the FBA users.

Prior to working on the Audience targeting, I had the FBA working with no
issues. It's a standard implementation using ADAM as the user store. After
going over everyones advice, I went back over how I was implementing FBA,
and Audience Targeting. In the end I was able to get it working, and it was
less complex than I expected. My goal was to be able to target to 3
different user groups, and each group could contain internal (AD), or
external (FBA) users. I am putting together a blog post (my first) on how I
implemented my solution. The solution also has a piece where based  on the
user, it passes a parameter to the targeted list, and shows a set of data
based on that parameter.

Audience targeting  will work with FBA users. The problem is that most of
the properties used to create audiences are keyed against Profile properties
and its difficult to get profiles populated for FBA users since it requires
the use of BDC.