ntfs actually has more "space" too. the clusters are smaller, thus using MORE of them, but less waste.
say a file is 10kb. on ntfs a cluster is say, 2kb, where as on fat32, its 8kb.
now, inorder to fill 10kb on fat32, it requires 16kb of cluster space, where as ntfs has 0 waste.
Where possible it is almost always better to format your drives using NTFS. The main reason for prefering NTFS is its "self-healing" properties. Basically all you really need to know is that it's more reliable than FAT32.
Speed, FAT32 is usually a little quicker, especially for smaller disks. But I doubt you'll notice any real difference. If you want a faster hard drive, buy a 1500-RPM SCSI drive.
The only time you would might prefer FAT32 over NTFS is if you use dual or multi-boot Windows 98/Windows ME with either Windows 2000 or XP. If all your drives are formatted as FAT32, you would be able to read-from/write-to/access any drive from any operating system.
FAT32 is faster in cases where the partitions are less than 18GB. NTFS is faster with anything larger.
Fat32 only has share level permissions, whereas NTFS has file level permissions. The latter is more secure.
Both file systems fragment equally for the most part, although NTFS is more resistant. However, you'll still need to defrag regularly.
if you are fat32 now, and want to go to ntfs, its simple... (in xp/2k)
save and close everything.
make a backup of anything stupid important... like your paper thats due tomorrow..
start->run
type: convert c: /FS:NTFS
where C: is your main drive with windows on it.
but the big thing to know is that fat32 is gettign phased out. eventually, shit won't work on it. its a good idea to jump on it.
all my systems are ntfs and will be that way until i go to linux as my primary os.