NTFS is the native file format for Win NT based operating systems. There's a lot of advantages of using it but, I would add that it's not for everybody. NTFS has a lot of system overhead and if you happen to have a small HDD, i would suggest using FAT 32 instead. The security built into NTFS is I think a bit of an overkill for the average user who doesn't know much about computers. For instance if you happen to lose your log-on password - you're pretty much screwed. You either need a 3rd party tool to break in or reinstall the OS. In a case like mine, where i have a 200 GB HDD, you're almost forced to use NTFS. I cannot imagine using FAT32 with one single large partition and having a huge cluster size that goes along with it.
It has more to do with the needs of the invidual using the PC and how knowledgeable they are with PCs. Even on a FAT32 HDD, Win2000 and Win XP will run smoothly.
Well like i said earlier, it depends on a few variables. But generally speaking, if you're installing an NT based OS and you're familiar with PCs and know the benefits of using NTFS - then you might prefer using NTFS over FAT.
But if you're a home user and security is not a high priority for you, FAT32 is just fine. I'll say again, it all depends on the user's needs and how comfortable he/she is using the security features of NTFS.