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Partition Magic has an option to check cluster waste so you can see what different cluster sizes do to the wasted space effect.
I believe that you pick a partition (possibly your only one) and select Advanced/Resize Clusters. 4K is about as small as Windows9x/ME can go. WinNT/2K can do 512byte clusters with NTFS at some expense to overhead and memory.
As for optimal, I believe that Windows Fat32 has a 8G boundary at the 4k clusters and a 16G boundary at 8k clusters. If you make the entire 20G drive one big C:, it would use 16k clusters. If you want to play with Linux, I'd make C: as large as 8k clusters will go and then leave the 4G for whatever you need. Linux will usually install in about 2.2G if you run everything.
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