NTFS vs. FAT32

No real competition: unless you have specialist needs for the FAT32 (such as having to access the disk contents without logging in) - NTFS wins. NTFS is much more stable, more fault tolerant, more secure and more efficient.

Partitions

I would go with 2 partitions in the case of a single OS, 1+n in the case of multiple OS. True, it's all the same disk anyway, but you'll be thanking yourself for having a separate partition for all your documents and files when your Windows installation fails or becomes corrupted, when you will then sometimes have to format the entire partition (it's bound to happen ) So I would put aside, maybe 20GB for C: (Windows + Program Files) and the rest for the documents and anything else non-Windows/Program Files related.

Btw, it's considered by many to be more or less suicidal to install more than one OS on a single partition...

XP vs. W2K

I personally prefer the clean-cut look of W2K myself, but I guess most people favour the elaborate features of WXP. W2K, to my knowledge, is more lean in terms of hard disk and memory use, therefore would run marginally faster in most settings I believe. But people's mileage may vary and it's usually down to personal preference.

Re. Hidden partitions...

IBM uses a hidden partition for their Recovery button, as you may be aware, that recovers the whole system to the factory setting at the touch of a button. Some people prefer the extra space rather than having a ready-to-go recovery system, others prefer the convenience of the recovery system.

PS. I thought that the IBM X31 used 1.8inch drives, not the 2.5inch drives. Am I incorrect? because to my knowledge, there are no 60GB/7200rpm drives for 1.8inch yet... and if that's the case, your 60GB will not fit in the laptop.