Windows 2000 runs natively with NTFS, and seems to perform best with NTFS.
NTFS has all of the basic capabilities of FAT, and it provides the following advantages over the FAT and FAT 32 file systems:
1. Better file security through access control lists.
2. Better disk compression.
3. Support for large hard disks, up to 2 terabytes (TB).(The maximum drive size for NTFS is much greater than that for FAT, and as drive size increases, performance with NTFS doesn't degrade as it does with FAT.)
If you're using a dual-boot configuration (using both Windows 2000 and another operating system on the same computer), you may not be able to gain access to files on NTFS partitions from the other operating system on your computer. For this reason, you should probably use FAT32 or FAT if you want a dual-boot configuration. The NTFS used by Windows 2000 is not compatible with the version used by Windows NT4. There are programmes available that will make NTFS partitions accessible under Windows 98/ME such as
NTFS for Win98.
One advantage of NTFS is that it is a recoverable file system because it keeps track of transactions against the file system. When a CHKDSK is performed on FAT, the consistency of pointers within the directory, allocation, and file tables is being checked. Under NTFS, a log of transactions against these components is maintained so that CHKDSK need only roll back transactions to the last commit point in order to recover consistency within the file system. Under FAT, if a sector that is the location of one of the file system's special objects fails, then a single sector failure will occur. NTFS avoids this in two ways: first, by not using special objects on the disk and tracking and protecting all objects that are on the disk. Secondly, under NTFS, multiple copies (the number depends on the volume size) of the Master File Table are kept. The role of the MFT is critical in NTFS, and it is easily fragmented: regular use of a good defragmentation tool is recommended
Personally, I prefer to turn off logging....it takes up a fair amount of overhead.
Another key feature of NTFS is the ability to encrypt files and directories, this process is transparent to the user. NTFS also has a disk quota system, where disk space can be allocated to different users: again this is transparent, the user simply sees the disk space available to them.
Finally, if you do a lot of file searching, the indexing feature greatly speeds up searches by maintaining an index of all files on a drive.
All of the above does have its impact on performance though, and I recommend you disable any features that are not needed if you use NTFS. If things go wrong, remember that you will not have the comfort of being able to boot into DOS: installation of Microsoft's Recovery Console, or some other recovery software is recommended.