When you drop the disk in to install Windows, you have to format the drive anyway, and using NTFS is not going to cause any problems. You can get NTFS-3G+MacFUSE and that will enable NTFS writing support on OS X.
If you're installing XP, you do not have to format the drive. Boot Camp has automatically formatted the Windows partition as FAT32 for quite some time now. You used to have to format it in the betas. Yes, you can delete it and format as NTFS.
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