Not for all of them... I just stuck 4 cards formatted in the camera into the PC card reader and checked the file system.
1GB SanDisk Ultra II (Compact Flash) - FAT
1GB SanDisk Extreme III (SD) - FAT
2GB SanDisk Extreme III (Compact Flash) - FAT
4GB IBM Microdrive (Compact Flash) - FAT 32
So it seems like the camera only uses FAT32 when it needs to. It's my guess that some numpty junior programmer at Canon forgot to include the FAT32 handling code in the SD interface I/O routines.
Time for firmware update, Canon!
After reading this, I put one of my Sandisk Ultra 2Gb CFs in my card reader and did "properties", it's definately formatted FAT32, which is what I expected as it was formatted in the card reader after it was last emptied, my standard practice.
So I then put same card in camera (1D2N) and formatted it again, now it's formatted FAT.
Also in properties:
FAT format:65,536 bytes used; Free space 2,039,545,856 bytes
FAT32 format: 4096 bytes used; Free space 2,035,838,976 bytes
So I guess that leaves us with the question, are there any advantages of one FAT against the other, especially write speed?