How interoperable, exactly, are the OSs?...and what sort of functionality do you lose?
gad, i feel like such a n00b. I've been away from windows for a long, long time.
I have my windows XP on NTFS.
In OS X I can see and read my Windows partition, but i cannot write to it.
On windows, with MacDrive installed, my OS X partition is readable and writable.
Since my OS X partition is most of the drive, this works fine for me. Things that'll be written on by both I put on the OS X side, and I can always at least access any data.
NTFS will let you, among other things, work with large files (FAT32 is only up to 4GB) and you can compress files you don't use very often. I author DVDs occasionaly, so I chose NTFS.