Windows XP has the rather annoying 'feature' that it will not allow you to create FAT32 partitions larger than 32GB, at least in most circumstances. Unless you have a compelling reasons to use FAT32, I'd recommend NTFS (no 4GB filesize limit, or 255 character file path limit, for instance).
As to repartitioning, the Boot Camp assistant has an option to restore your drive to its original single partition setup. After rebooting, you can run the assistant once more, and create a partition of the desired size.