I did't know that FAT32 was still possible with XP...
The reason I use NTFS is because I have a dual boot system.
I separated the Internet with all its protection-software from the working apps. I now have Win98SE for the Internet on one partition. It uses FAT32 and has all the necessary protections like a good virus scanner, a firewall and a spyware catcher. These apps use a lot of system's resources because they run in the background, so Win98SE, being not too stable, is only used for this and functions perfectly. It doesn't have to work.
Win2K, on another partition (not installed like MS suggests, but really independant) is running in NTFS. It can read all FAT32 from the other partition so I can easily transfer from one to another. It needs no protective apps, so its system's resources are clean and it serves for work (and play). I have not one app that doesn't run perfectly under it, even those small freeware fractal thingies I love so much (Tierazon, Dreamer, Flarium,...).
Another advantage is that if ever a virus should invade my system, it can only affect the FAT32 partition as Win98 isn't capable of reading NTFS. In the worst of cases, I can uninstall Win98 without touching my apps. OK, theoretically there is a possibility of a Bootsector virus, but with a good updated scanner (Panda) and the BIOS virusprotection on, this can be forgotten.
But indeed, I suppose it's a NT problem here, NT together with PS7 coding. I hope it'll work out fine. And for me I hope that I can install 7 at the side of 6. In fact: there should be a smal app that allows you to apply filters so you don't have to make PS even slower than it already is...