Yes - XP will install on either type, and can work with any mix. The
only constraint is that it will not itself create or format a FAT 32
partition bigger than 32GB - but you don't want to
Actually, you might - and if you do, BING will do the trick very
nicely. You don't have to install it as a boot manager; if you
cancel, it will go into the partition tools section you need. Say Yes
to "do you want to convert to NTFS?" even if you don't (for now), and
if you ever do, you won't get stuck with 512-byte clusters.
If your HD is < 100G, you can use WinME's FDisk and Format, or the
bugfixed FDisk for Win98 and Win98's Format. You can use Win95 SR2's
Format as well, if you want to.
If your HD is < 60G, you can use standard Win95 SR2 or Win98 FDisk and
Format, even in their unfixed forms.
I would not run a large HD as one big FAT32 C:, or any other sort of
one big C: for that matter (irrespective of the file system). I
happily use large FAT32 volumes (up to 120G) for data volumes other
than C:, and it works fine. I prefer a small and lean 7.99G FAT32 C:
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Running Windows-based av to kill active malware is like striking
a match to see if what you are standing in is water or petrol.