eeh, you "can" do that, but i would rather backup the disk, and shrink the fat32 some (only ~3G needed, but i would go for 5 or so), then make a
/
swap
/home
partition in that space.
but be certain to backup first.
as for the other way (on your existing partition).
check this out,
http://www.knoppix.net/wiki/Win_Partition
there are a few ways much like this you could use.
ask further if you wnt, hope it helped you some.
check out the other install options from the list in this link
http://www.knoppix.net/wiki/
there are even more but this should keep you for a few days.