I've run NTFS and FAT32 on Win2k and XP and can't tell a difference. NTFS handles large drives better than FAT32. If you aren't going to partition your hard drive, you'll want to use NTFS for 40GB and above. I wouldn't recommend NTFS if you've got a 5GB drive for everything, due to the Master File Table fondness of space.
What you've heard is true, but to a point. FAT32 has a limit on the size it can handle, and that's the point where you need to use NTFS.
I'm not sure if it applies, but formatting a drive with Win2k limits the size to 32GB using FAT32. I'm going to make the assumption that XP would be limited in this way too. NTFS does have security measures built to impose limits on access to files for certain users.
Overall NTFS is the better way to go. Small drives or partitions are probably best formatted as FAT32. If you are doing a dual boot with Win9x, FAT32 is the way to go for simplicity, and that 9x and 3.1 and earlier can't read or write NTFS.

i like NTFS for the one simple fact that i can shut down the computer improperly without having to run a checkdisk. I get power outtages sometimes and it's nice to have a filesystem that doesn't get f.ucked up.

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i like NTFS for the one simple fact that i can shut down the computer improperly without having to run a checkdisk. I get power outtages sometimes and it's nice to have a filesystem that doesn't get f.ucked up. Why not get a UPS?

NTFS is the only choice for me except on my C: partition where i have windows me installed

Unless your dual booting, I would run with NTFS. With the speed of today's machines, you won't notice a difference in performance.