NTFS is the new super filesystem. NTFS allows lots of Win2K features that cannot be used on FAT or FAT32. For example, you can create security and access control with NTFS and you can't with FAT. There's a few other bits that are of no interest to you.
But the main issue is with file size. With FAT32 you cannot create a file bigger than 4Gb, but with NTFS its unlimited. Also you have an upper limit of 2 terrabytes for your volume size with FAT32 but with NTFS its possible to go beyond.
Microsoft recommends you to use NTFS for a disk of your size cause NTFS is more secure, reliable and makes efficient use of the disk space supposedly removing the need for defrag cause it manages itself. I've not much experience with 2000, I use NT tho and you still need to defrag once in a while.
FAT32 is really the advanced FAT (File Allocation Table) for use with win95 & 98. Everything else now uses NTFS.
Found this on the web that lists the pro's of NTFS:
NTFS (New Technologies File System) has all of the basic capabilities of FAT, and it provides the following advantages over the FAT and FAT 32 file systems:
File security. Access rights can be assigned to files and directories, allowing users full access, partial access or no access at all to data on your hard disk.
Disk compression. File and directory compression can be performed directly without the need for third party utilities, saving space, while allowing for transparent access and operation to the user.
Support for large hard disks, with a theoretical limit of 16 ExaBytes, and up to 2 TeraBytes (TB).
NTFS supports Unicode, and natively supports long file names.
Disk quotas can be assigned, limiting the amount of disk space users can access on a partition.
Encryption. The NTFS 5.0 file system can automatically encrypt and decrypt file data as it is read and written to the disk.
NTFS can be accessed by Windows NT, Windows 2000 and Windows XP. Note that there are some differences between the NTFS used by Win2K/XP and WinNT; you need to apply Service Pack 4 to Windows NT in order to access NTFS5.
Fault tolerance: file system journaling.
Mounted drives: attach volumes to an empty folder. Operates much like the Assign command from DOS.
Hard links: create an NTFS-based link to a given file.
Sparse files: assign and reserve hard disk space to specific files.
File Streams: multiple data streams are supported and accessible with NTFS.
and there's some more techie stuff at:
http://www.anandtech.com/guides/viewfaq.html?i=63
Hope that helps,
---
Fug