Besides not being able to install Vista on FAT32, Microsoft removed the ability to format as FAT32 in Vista. There are workarounds that do allow you to do that if you do a search for FAT32 and Vista, but it is not in the normal formatting tool in Vista. And the information here:
Comparing NTFS and FAT file systems
You are correct that Mac HFS+ support is not included with M-Powered.
What I don't know is whether or not you can add MacDrive, and use it with M-Powered to record to an HFS+ drive in Windows:
www.mediafour.com/products/macdrive
You might want to ask on the M-Powered Windows forum to see if anyone is doing that.
Even if you were not able to record to an HFS+ drive in M-Powered, you would still be able to use an HFS+ drive for transfer if you had MacDrive installed on your Windows computer.