1 - Blessings on your work - Shalom to all you meet.
2 - No reason to keep what you have been given - maybe best to format and create a clean install of the OS.
3 - The advantage of the two formats is that Fat32 can be accessed via DOS (which can be useful) and NTFS is stable and faster.
4 - BUT: I would format both as NTFS and install XP. Create a system partition and a partition for data and things should be ok. As it stands, there is little point in keeping the mixture.