Fortunately, there's not a lot to add about installing from FAT-32. The main thing you must do is to change the partition type of the FAT-32 partition on which your Red Hat installation files reside to something that Linux will recognize, such as 06 ("DOS 16-bit >=32M"). On my test installation with FAT-32, the FAT-32 partition was of type 0b, and Red Hat's installation routines refused to let me point to such a partition for the source files. Fortunately, the actual FAT-32 code doesn't seem to rely upon the partition type matching the contents of the partition, so this isn't a problem for Linux; however, I strongly recommend that you return the partition type to its original value after installation! If you fail to do this, DOS, Win95, or other OSes might become confused and trash the partition!
I'm actually not sure how fussy Red Hat is about filenames when installing from FAT-32. I do have VFAT support on the beta-2 install floppy, so if you get the filenames right, Red Hat won't have a problem. I don't know how much leeway it gives you in this respect, though, so I suggest you read the instructions on filenames in the Joliet instructions section. That section also includes comments on what files are necessary, though I believe the RedHat/instimage directory is not required for a FAT (or FAT-32) installation, since that's what's on the second floppy. Speaking of which, you will need the original supp.img floppy to do an install from hard disk, whether the source filesystem is ext2, FAT-16, or FAT-32.
As with a Joliet install, you'll lose the ability to read FAT-32 once you've installed the system, since Red Hat installs its kernel from the target directory, not from the floppy. You can get this ability back by re-compiling your kernel with the patches available from http://bmrc.berkeley.edu/people/chaffee/.
If you need to re-partition your system so that you can have both Linux and Win95 on it, you may want to check out a couple of programs, both of which can shrink a FAT-32 partition to make room for Linux (or any other OS). The first is the freeware FIPS program. The standard version won't work with FAT-32, but there's a new version on the same site as the FAT-32 patches themselves that will, though with some restrictions. The other option is the commercial program Partition Magic, from PowerQuest, which can both shrink and grow FAT-16, FAT-32, OS/2 HPFS and WinNT NTFS partitions, as well as converting from some of these formats to some others and installing a Boot Manager program for selecting between multiple OSes. IMHO, Partition Magic is well worth getting if you do any re-partitioning more than once or twice a year.