Hi, taken from here
http://mywebpages.comcast.net/SupportCD/XPMyths.html
Myth - "The FAT32 file system is better than NTFS."
Reality - "NTFS is the better file system with many advantages over FAT32.
NTFS features: Built-In Security, Recoverability, Alternate Streams, Custom
File Attributes, Compression, Object Permissions, Economical Disk Space
Usage using a more Efficient Cluster Size and Fault Tolerance. Windows 2000
and XP come with NTFS version 5 which includes even more advanced features
such as: Encryption, Disk Quotas, Sparse Files, Reparse Points, Volume Mount
Points. None of which is available with FAT32." - Comparison Chart
Performance
NTFS is built for speed with impressive disk I/O performance on large
volumes (Over 400 MB). NTFS uses a binary tree structure for all disk
directories, which reduces the number of times the system has to access the
disk to locate files. This system is best for large directories, and NTFS
easily outperforms FAT32 in these situations. In addition, NTFS
automatically sorts files in a folder on the fly. NTFS gains an edge over
FAT32 by using relatively small disk allocation units (cluster sizes) for
NTFS volumes. Smaller clusters prevent wasted disk space on volumes,
especially those with numerous small files. Because NTFS uses small clusters
better and has a more efficient design, its performance doesn't degrade with
large volumes, in contrast to FAT's. As the number of files and volume size
increases NTFS performance is not effected but FAT32 continually gets
worse. - Gaming Performance
Reliability
In addition to its extensive memory and application protection features,
NTFS is a reliable file system. When storing data to disk, NTFS records file
I/O events to a special transaction log. If the system crashes or encounters
an interruption, NTFS can use this log to restore the volume and prevent
corruption from an abnormal program termination or system shutdown. NTFS
doesn't commit an action to disk until it verifies the successful completion
of the action. This precaution helps prevent corruption of an NTFS volume.
NTFS also supports hot-fixing disk sectors, where the OS automatically
blocks out bad disk sectors and relocates data from these sectors. This
housecleaning happens in the background. An application attempting to read
or write data on a hot-fixed area will never know the disk had a problem. I
only recommend and use NTFS with Windows 2000 and XP." - Source