I have a 250GBHD I use for backup and storage for my 98se and xp. It is FAT32 so I can use it for both 98se and xp. I have never had a problem backing up more than 4gb from any movie. The only problem was a few times I tried to backup my entire 98se. After 4gb it wouldn't continue. Now I just pick and choose which files I need the most.
As far as folder capitalization, I got this information from Scuba Pete's website a long time ago.
My xp never had an upper case problem so I never questioned this information. Is this just a 98se problem?