HD formatting for use on PC and MAC

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I need to format a 40 GB external drive for use on my Win XP machine and the Macs at school. Current format is NTFS but I've heard the FAT 32 has limitations. Any easy(read cheap or free) fixes?
Thanks
 
To the best of my knowledge we are on OS X (panther?). It's only a 40 GB drive, just would like to have one partition if possible as opposed to two. A friend did suggest I have one NTFS part and one FAT 32 though and this made sense also.
 
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