It is entirely possible, but highly not recommended. There is a very
good reason as to why USB Flash drives are left in FAT.
Here are just a couple of reasons before I post how to do this. First
off, if you try using this drive in a computer that does not exist on
the same domain as you, it will not recognize your user SID and you will
have to take ownership of the USB drive. You can bypass this by
allowing full control to all. You can corrupt the drive easily. One
way is by going into suspend mode with the drive in, remove it, write
data to it on a different computer, then put it back in and wake the
computer. All your data is corrupted. It fails to clear the lazy
writes. The other way is even worse. If you simply pull out the USB
storage device before it has finished flushing the I/O buffers.
The only two good reasons to do this would be encryption and compression.
Do this to allow formatting as NTFS:
Click Start-Run-Type devmgmt.msc and click OK. Now find the USB Drive
and click properties for it. Set the policy of the USB Drive to
"Optimize for Performance". The default is to optimize for Quick
Removal, which restricts you to the FAT filesystem. Now you can format
the drive as NTFS in My Computer or Removable Disks in Computer Management.
When you want to remove the drive, you will have to be sure to wait
until the drive has prepared itself to be removed. If you remove it
earlier, it will cause data loss and potential file corruption.
