Yes you can use partition magic. The important part is splitting up the partition w/o losing your data, so however you manage to get that done is fine. The default file system for Linux is e2fs (extended 2nd file system) and I believe Partition Magic can create that file system but it could just as well be fat32 because your install will create and format the e2fs.
As for Fat32 vs NTFS, go w/ Fat32 because while Linux is able to mount both an NTFS partition will be read only.
My advise would be to just jump in and install it. There will be a ton of options and your first install might seem a little overwhelming but don't sweat it because after you get to know a bit about Linux you'll probably want to do a few more installs.
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ARTacus
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