Actually, NTFS is case sensitive thanks to POSIX compliance. You can read more about it in Filenames are Case Sensitive on NTFS Volumes from Microsoft's Knowledge Base. The Windows system calls and APIs do by default behave in a case preserving manner. But you are confusing what Windows allows you to normally do with the actual filesystem. I say "by default" because with some registry tweaking Windows can become case sensitive as well, though I imagine this would break a lot of things (I also hear it is harder to enable this under Windows 2003).

Update: Sime minor rewording.