XP the home version will install to a Fat32 partition. There is also the option to revert back to the previous version. The Windows, MyDocuments, and Program Files directories will be deleted howver when upgrading. The default installation of any version of XP will create an NTFS type partition which is based on the NT core. XP does favor a new and fresh partition to go on.
The first thing to do when changing any operating system is to copy anything important to removable media like cd-r/rws, data dvds, dvd-rws, a spare hard drive even for later copy to the drive seeing a new OS on it. If you have to reformat the drive this will preserve your files. Regular backups of course help prevent losses as well.
