DriveSpace 3, in particular, is helpful for drives > 1 GB, if you set
   compression to "none". This is because DriveSpace will use a smaller
   physical cluster size.
   
   FAT file systems have a 65 thousand cluster limit (64 K, or 65 536
   clusters); this means as the drive gets bigger, the cluster size gets
   bigger too. On a 1 GB hard drive, the cluster size is 32 KB! That's a
   lot of disk space wasted if your file is much smaller than 32 KB!
   
   DriveSpace (and Stacker, and what-have-you) use their own file system
   and emulate FAT, and they can compress the unused space in a cluster.
   DriveSpace 3, in particular, will use no more than 512 bytes per
   simulated cluster, if your file is smaller than this.
   
   You can observe this by running DEFRAG on a compressed drive in Win95;
   after the initial Defrag pass, it will de-fragment a second time,
   showing the relative sizes of each cluster. Tightly compressed
   clusters will appear shorter.

     * 11.2.1. Does disk compression on > 1 GB drives work with FAT32 as
       well? 
       
   Apparently not. MS describes FAT32 in KB article Q154997 and they
   clearly state that disk compression does not work on it (Hey, Stac
   Electronics: That's your cue! Get on it!) This probably has something
   to do with FAT32 being almost completely different from original FAT
   and VFAT; the root directory being a real FAT chain instead of a
   couple of sectors, for example.
   

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