The best thing to do is to understand the differences between FAT16 and FAT32, and the differences between small and large partitions. Then you should make a decision based upon your own needs. FAT32 both use clusters to organize data. The size of the clusters that are used depends on which of the two file systems you use, and how large your partitions are. For example, a 1.0 GB partition under FAT16 uses 16 kb clusters, while a 2.0 GB partition uses 32 kb clusters.
Larger cluster make for faster file access, but they waste disk space.
Smaller cluster sizes mean you can store more files in the same space, but file access is slower. Two more things to remember. This means that to get the full capacity of a large drive, you must use multiple partitions. You also need FAT32 to take advantage of a few of Windows 98's new features. See Microsoft for details.