|Windows Vista and later will not run on FAT32 partitions. The OS partition must be formatted as NTFS. If NTFS file system burden is too much for your system, then you can reduce it by the following method:|
Create a blank text file and copy the following into it. The file name can be anything. Let us say ntfs.txt.
Windows Registry Editor Version 5.00
Then rename the file extension to .reg, such as ntfs.reg. Now you can double-click ntfs.reg file to merge it into registry. This reg file reduces the burden that is peculiar to ntfs file system. You must have administrator privileges to merge the reg file into registry.
Furthermore, you will do better by increasing your RAM to over 2 GB.
EDIT: Sorry I now realize that you have Windows XP that can run on FAT32 file system. But the above method is also correct for Win XP on NTFS partition. You can try it.