I don't see why you couldn't install the base eCS on a FAT partition. The FAT driver is in the kernel, I do see that sysinstx.com is missing but could be added. Looking quickly there is some documentation that uses long names, some *nix utilities and some drivers that could be renamed. Of course you'd have to install applications on a drive that supports long names or be very limited in the programs you use.
As you point out, FAT is a horrible file system to use as your main boot partition. I did have a bootos2 install on FAT for maintenance for a long time, updated to 4.5+ level (including LVM and JFS support) and it worked fine for what I needed it for.