I think that you are confusing XP with the BIOS WD.
XP can format a drive as part of its installation procedure in either FAT 32 or NTFS but has a 32 gig limit if it is done in FAT 32.
If the BIOS cant detect the full size of the drive then it wont allow XP to format the extra no matter which file system it is going to use
Post the chipset number that you told me last night WD, I forgot which it was, then someone (Dack) may be able to find the right BIOS update for you