"maximum partition size for a FAT32 and XP is 32 GB"

The maximum partition size XP will allow you to format is 32GB. That's Microsoft dictating to you that they want you to use NTFS on larger volumes (i.e. they intentionally crippled XP's ability to format anything larger than that as FAT32). XP runs just fine on larger drives if they were already formatted as Fat32 before installation. For example, if you're upgrading WinME and your drive is bigger than 32GB you don't have to convert it to NTFS to install XP and your entire drive will remain totally accessible. I have XP running on an 80GB FAT32 drive with no problem at all.

Note that you can convert a FAT32 drive to NTFS at anytime using XP's utility, but you can not convert from NTFS back to FAT32.