Hey Newbie~wan,
When you say that you left 7gigs for Linux I suppose that means that you just left if spare and didn't create an actual partition with this space?
It is not format that decides that filesystem it is whatever program creates the partition in the first place. So you need to create a fat32 partition then format it.
the reason you are seeing things a little differently from the win98 boot disk is that it cannot read ntfs, which is what i presume you have used for your win2k and XP partitions. Also is there hasn't been a partition created dos will not see it. You could use fdisk but as it too doesn't see ntfs I would probably leave it.
Disk manager should do it alright. make sure you are creating an logical partition rather than a primary partition. I usually use partition magic so can't really give much info on the ins and outs of disk manager. Had a brief run through it with out making a partition but looks like all you have to do is follow the prompts.
Griobhta