There exist third-party drivers that enable NT 4.0 (and possibly even NT 3.x, though I have not tested this) to read/write
to a FAT32 partition but I was curious as to whether or not NT 4.0 could actually boot off a FAT32 partition.
In my research I have found 3 possible issues that prevent NT 4.0 from booting from a FAT32 partition:
- NT 4.0's NTLDR & NTDETECT.COM have no understanding of FAT32
- NT 4.0 Lacks drivers for the FAT32 filesystem
- The bootsector that NT4.0's setup creates is very fragile
To solve these issues, we require some program & files, these are what I have used:
- A partition manipulation tool such as PQ's Partition Magic 4.0 (the dos bootdisk version)
- A Fat32 driver for windows nt 4.0 (I've used the sysinternals fat32 driver)
- NTLDR & NTDETECT.COM from a newer version of windows NT (I can confirm 2k's & 2k3's work, XP's should also work)
- a 2k, XP or 2k3 install CD to boot into the NT Recovery Console
after lots of trial and error & botched NT 4.0 installs, here are the steps that I found to work:
1. Install Windows NT 4.0 onto a 2GB FAT16 Partition
2. Ensure Service Pack 6a is installed
3. Acquire NTLDR & NTDETECT.COM from a Windows 2000, XP or 2003 installation & Overwrite NT 4.0's versions on the root of C:
4. Install the Sysinternals FAT32 for NT 4.0 Driver (an updated version of FastFat.sys may also work but I have not tested this)
5. Reboot the computer & Set FAT32.sys to run at Boot in the devices control panel applet.
6. Convert the FAT16 Partition to FAT32 using a partition tool such as partition magic
7. Insert a Windows 2000, XP or 2003 install cd & boot into the recovery console (Press r when setup finishes loading)
8. use FIXBOOT in the recovery console to re-build the bootsector
9. Windows NT 4.0 will now boot but we are not done
10. You may need to delete pagefile.sys off the root of C: and allow windows to re-create the page file as I've found it can become corrupt after the transition
11. Use a partition tool such as Partition magic to extend the partition to take up the entire drive (have not tested the limits here such as LBA48/137Gb+ partitions)
12. Reboot & tada

Windows seems to work as normal although I have not tested the extent of the stability, your milage may vary.
Hopefully someone finds this useful in the future, I just needed a place to document the process. Thanks.
EDIT: added an extra item to the files required.