I'd use FAT32 for the Win98 partition or disk, NTFS for the W2K partition / disk. If you need access to your W2K partition when booted into Win98 there's an inexpensive utility from Sysinternals that allows a Win98 OS to have read and write access to NTFS4 and NTFS5.
But I do tend to agree with the sentiment "Why bother?". Unless there was something I absolutely had to have that would run under Win9X but NOT under W2K, I wouldn't bother dual booting. W2K is enough better that it makes the hardware seem better.
BTW, NTFS carries a lot of overhead (however efficiently managed) for maintaining the file sysystem. FAT32 is noticeably faster on smaller partitions with less complex directory structures / fewer files. The more complex "database" plus journaling will net you a slower boot and shutdown than you get with FAT32. But normal operations like opening apps seems a bit snappier because NTFS "knows where it's at" when it comes to keeping track of files and the fragments thereof. NTFS really begins to shine, speed-wise, when the directory / file structures get complex and the partitions get huge. NTFS fragments just as rapidly as a FAT32 partition with the same sized clusters. Since NTFS partitions of a given size tend to have smaller clusters than FAT32 allows, they usually actually fragment FASTER than FAT32. However, NTFS suffers much less performance loss at the same level of fragmentation -- unless the MFT or pagefile are fragmented. MFT and pagefile fragmentation can kill performance. Best to get a good defragger which can take care of the MFT. (The one that comes with W2K won't defrag the MFT.)
BTW, for the most versatile NTFS partition you want to format NTFS during the install and specify the 4,096 byte cluster size. This is optimal for most people -- since it's the largest cluster size that lets you have compression / encryption, yet it's small enough that it doesn't contribute unduly to fragmentation. If you format FAT or FAT32 first, then convert to NTFS later, you wind up with 512 byte clusters. That's no good. That size cluster is half the size of an MFT file entry. That will force the MFT to fragment, which is one of the most ungood things you can do for file system performance in NTFS.
As far as benchmarks are concerned, I still haven't seen any that reflect real world experience. I would use NTFS if it were half as fast as FAT32, just because of the security capabilities and the solidity of the data storage it offers. Having come from the AIX world where a power supply failure usually led to bloodshed (Hell, you couldn't even power down the boxes manually without unplugging them!), having a robust OS that doesn't give up the ghost if the power gets killed is very nice.
$.02 from an old fart perspective.
Regards,
Jim