When installing XP using NTFS, is there a way to set the cluster sizes to 256 bytes or even 122 bytes rather than 512 bytes?

I am aware that a smaller cluster size impedes HDD speed but I'm keen to optimize space.

Quite how much space do you think you'll gain?

And no, you can't have a cluster size smaller than 512 bytes, and I would not recommend going that small anyway. You will not gain a useful amount of space.

just buy another hdd

The way I understand it is that only the content of one file will be stored in any particular cluster, the file being spread across as many clusters that are required to store that file.

However, if only say a few bytes of data (the end of the file) get stored on a cluster, the rest of that cluster is then redundant for further storage, hence my thoughts on reducing cluster size.

If I'm wrong on this line of thought fair enough.

you are correct, but i don't know if you'll notive much difference.
is this any help?
http://www.ntfs.com/ntfs_optimization.htm

Trust me, this sort of 'optimisation' is utterly pointless. You will not gain any useful additional space (you may in fact lose usable space), and you will ruin the performance of the filesystem.

Thanks for the posts folks.

According to http://www.ntfs.com/ntfs_optimization.htm, since my OS partition is 40GB, XP is formated with to 4kb clusters.