Where did this sudden myth of "you can't read FAT32 if you use NTFS" come from?
The type of file system you use doesn't affect what other file systems can be read. Windows 2000 and Windows XP can read FAT12 (floppy format), FAT16, FAT32, and NTFS in its various versions. You can install it to anything except FAT12. You can read any of the other types no matter what you use for installation.
Windows 9x versions can't read NTFS though, because the OS itself doesn't support it, not due to using FAT32, and I presume that this issue has become corrupted into the idea that NTFS stops you from reading FAT.
NTFS is overall a more efficient file system, and provides more reliability and features, such as encryption of personal files.
http://www.anandtech.com/guides/viewfaq.html?i=63
Just make sure that any utilities you have such as disk defragmenters or partition managers are compatible, because the version of NTFS used in XP is different from the one used in WinNT and Win2k.