The XP pro installation program will offer you options for partitioning and formatting as it goes but it sounds as if it can`t detect your drive properly.
You say you are "loading the drivers for the mobo" do you mean from a floppy for a SATA drive connected to a mass storage controller(Promise Raid for example)?
If so is the controllers BIOS correctly set-up?
Does the drive appear when the computer POST`s (Power On Self Tests - may require pressing a key to view - check your mobo manual)?
Are you loading drivers after pressing F6 when Windows set-up prompts you?
If your hardware is a simple IDE drive does this show on the POST screen?
As to NTFS vs FAT32 opinions vary but I would use NTFS unless I had a very good reason not to (usually a dual boot machine running Windows98 as this O/S can`t read NTFS filesystems).