I should have been more clear. While Mac OS can read FAT, it can't actually be installed on a FAT disk. Moreover, there is a file size limit of 4GB with FAT.
When I was running BootCamp on my mini I just installed Windows on the partition that BootCamp created. I used NTFS. I had this partition scheme:
Mac mini internal 60GB
-40GB = Mac OS (HFS)
-20GB = Windows (NTFS)
External 250GB
-200GB = Mac OS storage (HFS)
-50GB = Transitional partition (FAT)
Because the transitional partition was accessible by both Mac OS and Windows, I used it to transfer files between the two. I tried many other partition methods, but this was the most productive for me. I should say that I am primarily a Mac user, and only dip into Windows for compatibility checking (I'm a web-designer) and a few other Windows-only apps.
Once I replaced all the PCs with Macs, I started using Parallels. If you can afford it, its the best option (unless your into gaming). It doesn't require any of this partition nonsense.