During Setup, if you create a partition, the option to format the hard disk with a file allocation table (FAT) format is not available.
This behavior can occur if the partition that you have selected to create is greater than 32 gigabytes (GB) in size.
This behavior is by design.
You cannot format a volume larger than 32 gigabytes (GB) in size by using the FAT32 file system. Windows XP can mount and support FAT32 volumes larger than 32 GB (subject to the other limits), but you cannot create a FAT32 volume larger than 32 GB by using the Format tool or Windows XP Setup. If you need to format a volume that is larger than 32 GB, use the NTFS file system to format it. Another option is to start from a Microsoft Windows 98 or Microsoft Windows Millennium Edition (Me) Startup disk and use the Format tool included on the disk.
For additional information about the limitations of the FAT32 file system, click the article number below
to view the article in the Microsoft Knowledge Base:
Limitations of the FAT32 File System in Windows XP