ata66 drives perform no better (or a little better) than the best of the ata33 variety.
and since your drive is so damn old, getting a newer one (no matter if 7200 rpm or ata66 or ata100) would improve loading of programs and your basic transfer speeds noticeably.
there is no way of know what kind of performance increase, but there will be an increase. of course you should use FAT32, but only if you are running a FAT32 capable OS.
what motherboard do you have?