The atapi.sys driver does NOT correct the bios/ntfs bug in NT that says you should not exceed system/boot partition of 7.8gig.Quick lesson: in ms-speak boot is where the winnt folder resides and system is where boot.ini, ntldr etc reside. If both on the same partition its referred to as system/boot. If seperate c: is system and d: is boot under default install.
You NEVER want to exceed this barrier or you can end up with a nonbooting system. This is due to the loader files being beyond the bios ability to address them.
Here is a way you can get around this limitation
http://www.ntfaq.com/Articles/Index.cfm?ArticleID=13922
and have as large a boot partition as you have disk space.
There is a bit of confusion about NT and fat16. Normally fat16 is limited to 2gig as you discovered George. NT, out of the box, can install to 4gig max for system/boot. It is able to do this due to the VFAT driver.
To take advantage of this you would use fdisk to make a 4gig partition. You would answer YES to large disk support.
Since it is FORMAT that decides the file system [fat16 or fat32] you would NOT use format to format this partition.
You would use the NT install to format the partition which it will do with no complaints.
George, not to be rude, but if you had spent 5 minutes googling NT Install you could have saved yourself hours [if not days] of wasted lifespan.
A search would have explained why your NT installs failed on fat32. It would have revealed a couple of methods of overcoming the NT limitation dealing with install.
BTW the method above I pointed you to is excellent for setting up multiboots BUT you can NOT multiboot DOS or DOS based OS's [9x/me] since they have a common msdos.sys/io.sys.
If you want to multiboot dos OS's you can do it with this
http://www.computing.net/howto/simple/usingpqboot/
Best of luck!