Which is better FAT32 or NTFS

NTFS uses a journal, which makes the filesystem very resistant to file corruption. And it is true that you cannot "convert" back to FAT32. You can always reformat the volume, though.
Can you make it functional again?
Corruption is typically a file/filesystem problem. Reformatting should give you a fresh start.

can convert it back , but not windows alone, I think it is not technical, but somekind of question of principals by MS.

NTFS can be converted back to FAT/FAT32, but not within the OS. You'll need to use tools like PartitionMagic, and this is not a risk-free operation.

For example, if you have a file bigger than 4GB (ie: DVD ISO image) on an NTFS partition that you want to convert back to FAT, you might have some file corruption issue, as the FAT file allocation table cannot hold files bigger than 4GB.

Yes it's true, you can not convert back from NTFS to FAT from windows ,
that requires a re-format or third-party tools .
Also, you can not format a flash-drive seen as a "removable" disk by windows
(and most UFD's are seen as "removable")
to NTFS unless you enable caching of the drive.
You will then be able to format it to NTFS by right-clicking the drive and selecting "format". Windows disk-management still wont show NTFS as an option btw ..
Enabling the disk-caching increases the risk of corruption if the drive is "unsafely" removed. Using NTFS will also increase the number of writes to the drive, likely to decrease the life-span of the drive .

If you don’t want to read a long post, here’s my recommendation first:

• FAT32: for removable (flash) media like memory cards, USB sticks and thumb drives up to, say, 32GB (if you don’t require files >4GB)
• NTFS: for removable hard drives — plus switch on the write cache, and always use "safely remove hardware"!
• exFAT — if you are the adventurous type: for flash media and SSD — designed for flash drives, but only available on Windows: XP+SP2 with KB955704, Vista+SP1, Windows 7, Windows CE 6+. No third-party (and Linux) support due to closed license.

The Pros and Cons in a nutshell (from memory, maybe I forgot something):

NTFS

• Pros
• can handle files >4GB
• has access control
• is a more robust filesystem
• can be used with write cacheing
• handles Unicode and POSIX filenames
• can be read/written by Linux (using ntfs-3g)
• is really fast when using write cacheing
• Cons
• wasn’t designed for removable media (and won’t show up as such)
• doesn’t support "surprise removal"
• needs portable drive to be set up with full access rights for EVERYONE, otherwise you won’t be able to use the drive somewhere else. (Hint: With Windows XP Home, you need to boot into safe mode and log in as an Admin in order to get access to the "Security" tab in file/folder properties!)
• will sometimes refuse to "safely remove drive" because the write cache hasn’t been emptied yet (Hint: In the worst case, try to log off the user, log back on, and retry "safely remove hardware". This will close files, unload programs and DLLs that might still be open on the drive, and flush the write cache.)
• won’t work with older OS’es (like Win98), but who cares, really?
• uses more write cycles on the drive (no problem for discs, bad for flash memory)
• has a "trashbin" on hard discs which gets consolidated with the "main" trashbin, so if the drive gets removed while there is still something in the drive’s trashbin, you’ll end up with a "filled" trashbin on Windows that can’t be emptied. (Hint: Reconnect drive, empty trashbin, safely remove drive.)
• won’t work on some flash drives (refuses to format as NTFS)

FAT32

• Pros
• can handle files up to 4GB
• has no access control, thus easier to use on the occasional stick
• can be read/written by Linux and older OS’es like Win98
• lost data can be restored more easily
• uses less write cycles than NTFS (good for flash drives)
• can handle "surprise removal" more graciously (i.e., if you wait until the stick’s LED stops flashing and "unsafely" remove it, chances are good that the data isn’t corrupt)
• can "officially" be used on removable media and will show drive removable
• Cons
• can’t handle files >4GB
• isn’t as robust a filesystem as NTFS
• won’t handle Unicode and POSIX filenames

exFAT

• Pros
• can handle files up to 16EB
• high performace
• optimized for flash drives
• supports Unicode character set
• Cons
• Windows-only, requires minimum Windows XP+SP2+KB955704, Vista+SP1, Windows 7, or Windows CE 6+.
• Absoluteley no third-party (Linux-, Mac-) support, closed license.
• You won’t find many PCs that have it installed when moving around. Thus: No access to your data on the portable drive!

Conversion

• FAT32 -> NTFS
• is supported, though I’d always recommend copying stuff somewhere else, reformatting the drive, and copying stuff back — uses less write cycles and you have a defragmented drive to start with
• cannot be undone (except by copying/reformatting/copying back)
• NTFS -> FAT32
• is not officially supported. There are tools for that, but I wouldn’t trust them. Files >4GB will lead to problems.
• will use too many write cycles on flash media — better to copy stuff elsewhere, reformat, and copy back (as above)

Oh well. Maybe this sheds some light on everything and helps making the "right" decision for you!