Title says it all. EXT2 would be better because: when some ludite puts the drive in their computer - it ask them if they want to format the drive (because it has ext2 on it and windows doesn't recognize it). Wouldn't that be better than showing them a FAT32 parition with which they can see all the files in the boot parition and deduce what the drive is for?

The ?design document of the USB installer says:
That makes sense if at some point we want to support using the installer from Windows.