"You can - however - have a FAT32 harddisk installed during the (NASSetup) setup"
"The hard disk should be FAT32 formated."
So it sounds like you can have a FAT32 drive attached even when running NASSetup and that a FAT32 drive may be the best choice when using TwonkyMedia. That's very attractive because you could then easily attach the drive to a Windows or Linux PC for copying large amounts of data and thereby skip the NSLU2's relatively slow throughput. Plus, you could more easily backup or clone the drive.
But, how big can the FAT32 partition be?
Back in 2005 Christian wrote:
"you can not have 80GB partitions in FAT32 - only max 30 GB"
Which may be interpreted to mean that Windows limits FAT32 partitions to 32GB (unless you format it with BootIt or some other partitioning app.)
Or it may mean that the NSLU2 doesn't support FAT32 partitions larger than 32GB. There are plenty of posts in these forums where people write that their FAT32 drive is not recognized.
However, two posts down from Christian's comment appears the following by LordJohnWhorfin:
"I currently have a 200GB drive hooked up to my NSLU2 and it hosts one large 200GB FAT32 partition. You have to use very large clusters, which is a little wasteful, but it can be done. XP arbitrarily won't let you create a FAT32 partition larger than 32GB, but it has no problem dealing with one if you created it elsewhere (on a Linux box, a Mac or directly on the Slug). My 200GB drive mounts without a problem on XP, OSX and the Slug."
Wow, a contradiction! Those are rare.

Let's nail this down.
Is FAT32 recommended just because it's more universally compatible and will mount because uNSLUng makes this possible? Sounds wonderful provided there's no 32GB limit. What's the complete answer about FAT32 partitions?
(Please know that I quote Christian because I look at him as an authority on TwonkyMedia, much like some people follow every word uttered by Alan Greenspan, former US Federal Reserve Chairman. Christian and TwonkyVision support always respond quickly to questions emailed them, and obviously Christian reads and responds to posts in this forum, which is very cool, too.)