Does Windows 8 have to be installed on NTFS?

Windows NT 6.x cannot be installed to a FAT or FAT32 partition, because they make extensive use of advanced features of the NTFS filesystem, like hard links and junctions.

Besides, allowing users to install to FAT/FAT32 in previous versions provided a false sense of security, since these filesystems do not support access control. Remember that one of the much-touted features of Vista was increased security.

Windows Vista and higher won't install to FAT32, and can only be installed to an NTFS partition. This is probably due to the use of symlinks, which is not supported in FAT32.

As for copying files, thats a no. Windows needs to be installed in order for the installer to configure your boot order properly. Just copying files won't do it.

You can't install windows on a FAT partition. You shouldn't use a FAT partition for your Windows install. You can use a program like AOMEI partition manager to create a new partition, but you can't delete your existing partition.