• Identify the file system that you are using. To do this, follow these steps:

1. Double-click My Computer on the desktop or Explorer.
2. Right-click the disk that you want, and then click Properties.
3. Look for the File System entry.

• If the disk is formatted in NTFS, your options for returning to Windows 95, Windows 98, or Windows Me are limited. Those operating systems do not read or recognize NTFS, and you cannot convert the disk to use the FAT or FAT32 file system. The bootable disk that you use and the drive on which you want to install Windows 95, Windows 98, or Windows Me cannot use NTFS. Microsoft does not support any third-party solutions for converting NTFS to FAT or FAT32.
• If the drive is using the FAT file system, you can install any operating system. If the drive is using the FAT32 file system, you can install Windows 95 OEM Service Release 2 (OSR2) or later.

The above was copied from: http://support.microsoft.com/default.aspx?scid=kb;EN-US;q31405