Flash Disk Install Options

Regarding the options:Installation on FAT32 with (optional) overlay file < 4GBInstallation on FAT32 with additional overlay partitionI don't really understand the difference and am not sure which to choose. I would require only about 3000mb.I am using 7.3.0 dvd, and have a 16GB usb drive.I don't have a hdd I only use the usb.Could anyone help me decide which option to use?

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Greetings, westcoast.

One rather trivial reason to use the reiserfs persistence option
is that it's faster. Formatting 3 G of Fat32 persistence seems to
take forever.

Thanks for the info.