OSX <-> Windows XP MCE without NAS? options/advice

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I'm looking for some advice and options here of what would be the best setup for me.

I currently have 2 machines...
1) XP Media Center 2005 pc containing 2 harddisks. Both NTFS, 1 for the OS and the other for everything else.
2) Black macbook, with 250 GB harddisk.

I need a way of storing data easily from both machines on 1 harddisk BUT i dont want to buy a dedicated NAS as my media center PC is turned on 24/7 anyway (so i may as well use that). Basically I want to use the 2nd harddisk in my media center as a kind of NAS itself but dont know how best to do it?

I have done the windows share option and then connected to it as SMB but dont know if that is really any good, and what limitations its got? I've read that OSX can read FAT32 so could format the 2nd harddisk as that (i dont think i've got any files over 4GB), but what advantage does that give me over the SMB windows share option? Also there seems to be a few programs around that are made for connecting between windows to osx and vice versa but why pay for these when the first 2 options are free?

Finally. I want to start using the time machine OSX program to backup my laptop to this harddisk over my wireless automatically (i've not looked into this yet so might be wrong here). Does this effect my choices above?

Cheers,
Stu

PS. EVH - It might be good to get some info on connecting between OSX and Windows and the options/advantages of different methods in the sticky? i couldn't find any in there at the mo, unless i just missed it.
 
Come on guys... someone must have both windows pcs together with macs and NOT be using a dedicated NAS. How do you share your data around between them?

I dont want to format my harddisk to fat32 just to find its not a very good solution and another option would have been better.

Also will this time machine software backup to anything? SMB shares? fat32 shares etc?
 
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