I have found through experience that FAT32 is faster, especially when dealing with many small files, but with larger files also. NTFS has a lot of overhead related ti security, as well as the peculiar "FAT" it uses. Also, I found NO difference in stability between the two. There is also the plus of being able to access FAT partitions from a diskette. I killed 2000 by accident once, and that was a lifesaver.
On the other hand, my largest partition is 4 GB, and microsoft CLAIMS that NTFS is faster than FAT ahen the partition is over 4 Gigs - but between what they claim and reality usualy pervades a HUGE gap. :-)
Actually, FAT 16 is much faster than FAT 32 - so you can use that if you want to. The only catch is that FAT 16 is limited to 2GB.
The plus side of NTFS is that you can selectively compress directories and files - if you compress a directory, you can choose to have all included files and directories compressed. However, the compression ration isn't great - about 1.3:1 on the average.
It all depends on your situation/hardware.
My box:
PIII 450@558, 256 MB RAM, IBM 7200 RPM 18 GB HD.
P.S. You can also get a utility to get win98/95 to read/write NTFS - I use a "warez" version and it works like a charm. No, I won't post it.