Use FAT16 with 64K cluster size for best performance on <=4GB ReadyBoost devices, plus W7 Intel Turbo Ram drivers!

This one might seem obvious but it actually makes a difference in performance numbers overall. You also avoid the journaling aspect of NTFS that is unneeded with a cache device.

If you dedicate the device to ReadyBoost, you will only have one file on the filesystem, so any slack/waste in the 64K cluster size will be made up from the lack of $MFT reservations.

Also noteworthy but often overlooked, you can multiplex ReadyBoost devices in Windows 7 so you can use multiple ReadyBoost drives if you really want. This helps out XP Mode on memory starved machines quite a bit.

If you are looking for a Windows 7 compatible version of the Turbo Memory driver from Intel, use version 1.10.0.1003 or higher. You can find a version of this on Station Driver's page here. I don't believe these have reached Intel's page yet, even though they are WHQL signed. The interesting side effect is that the new driver will enable ReadyBoost on the Turbo Ram without assigning a drive letter or file system to it. Pretty cool.