Can't symlink to steamapps on a FAT32 partition

This used to work quite well on the beta but magically stopped working in the release version.
I have Windows' Steam running on an external hard drive and I'd like to avoid duplication - but I can't create a symlink or else Steam fails and says

Steam requires that /Users/[USER]/Documents/Steam Content be created on a cast insensitive filesystem, with read-write access.

As far as I know, both are wrong - and I already know such a setup will work fine.