Except for some unusual situations you should use NTFS. FAT is rarely a viable option as the maximum volume size is only a maximum of 4GB. This would be very limiting with XP. The only time where FAT32 would be preferred would be on removable drives or very small volumes that are too small for XP anyway. It would also be necessary for volumes that need to be accessed by DOS or Windows 9x in a dual boot environment.
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