Wife's harddrive is busting at the seams (20GB) so I went out to get her something bigger and ended up getting myself two 120GB seagates 'cause they were only $60 each after rebates

So now I'm gonna move my drives to her pc and install the seagates in mine.
Since the beginning of my PC experience I've always partitioned my drives down to manageable size partitions, just a left over habit from when Win95 could only handle 2GB partitions. So here are my options...
1. ghost my old drives over to the new drives and use partition magic to stretch the drive partitions afterwards.
2. start afresh and then transfer data files over after my OS is fully installed.
I'm leaning towards no.2, time consuming, but that's not an issue. Question is, should I partition the new drives or not? Also, since I am a sole user on XP Home edition, what benefit does NTFS give me over FAT?
Thanks in advance