I'd recommend you to use NTFS unless you have a strong reason for using FAT32. It will work fine either way, but NTFS is somewhat more reliable and allows to use advanced file permissions.
BootCamp is faster because Windows runs natively in the Mac in the same way as any other laptop or PC. When running in a VM Windows shares the computer resources (CPU, memory, hard disk, etc) with the host OS. In other words, you are running two operating systems simultaneously with the same hardware resources.
You can have the BootCamp Windows running in a VM, so you can use Windows normally inside Mac OS. You can always boot Windows natively when you need it to have all resources available.
Last edited: Mar 20, 2009