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Yes, you can convert FAT32 to NTFS and keep all your files, and yes, if you use NTFS, a person with a FAT32 file system couldn't read your files off of REMOVABLE MEDIA "DISKS" (3.5" Floppy, ZIP Drives etc). As stated before, you will have no problems with CD's because they use their own file system (CDFS). There will be no problems with games and/or programs running on FAT32 and not on NTFS or vice versa because:
A.) It is a Floppy Program/Game and is written in FAT32 which can be read by NTFS.
or
B.) The program/game is on a CD (almost all have been since the release of NTFS, and if they had been on a floppy, then there would have been two sets of disks), which, an application on a CD would be in CDFS.
Also, just to clarify, there will be no problems 'sending' to FAT32 from an NTFS machine, and no problems 'recieving' NTFS from a FAT32 machine via electronic methods (email, file transfer, throught network server, etc). As stated earlier, the only problems that will be encountered will be using 'disks' that use the file system of your hard drive.
Any questions, post a reply.