As both Protocol Design and murphydog said above, there will be a variety of factors that will effect K32 vs K38 performance, and obviously a good example of either will be better than a poor example of the other. This is manufacturing variation at work.
I will assume you can buy or load your own ammo of high quality. The 32 has traditionally been more expensive and less available from the factory. If we assume we have a very good example of each and it is provided with equally high quality ammo, the answer to your question would still be a very definite "It depends!"
Outdoors and in the wind, the 38 wins every time. Also, the larger bullet diameter will pick up the occasional point per shot by reaching out to nick a scoring ring. In addition, the 38 Spl target round (especially the MRHBWC) is notoriously
un-finicky to reload for.
Indoors with controlled climate and lighting the 32 S&WL gives its biggest advantage, lack of recoil. If you're shooting a K22 as well, it will be almost like shooting two legs with the same gun. It will be cheap to reload with less lead and powder, and like the 38, uses small primer and once you have the (admittedly more expensive and harder to find) brass, it seems to last forever.
All of that being said, unless you are a real enthusiast (of some sort or another) the Model 14 makes more sense, but the Model 16 wins hands down on cool factor. Yes, I've had a couple of each, but to be honest have never fired any of them competitively (except a couple of rounds of PPC with the earliest K38). For casual use, I'll take my recreated Model 16-3 and a box or three of HBWCs or SWCs loaded to target velocities, or better yet, the gun S&W should have built, my Project 616 Stainless K frame in 327 Fed Mag. But that's just me... YMMV!
Froggie