Disk resize behaviour
Will it error out or will it remove some of my files?
So to answer your question it will error out, it will not remove your files.
To use a different filesystem (FAT, XFS, ZFS, whatever) on a Linode you would need to create a raw disk. Raw disks can only be resized up, not down - because the Linode Manager cannot mount them to determine the amount of free space. With raw disks, you're also responsible for increasing the filesystem size yourself, once you've increased the size of the disk.