Couple of points that Martin made may need refuting (I love a good argument).
Point 1. "two seperate drives are more secure" - not really you still have two points of failure. Ok if you keep all your data on one disk and just the os on the other then if the os disk goes down you have your data intact. However you still have to recover your OS, either from a backup or by reload CD, drivers, patches, extra programs, settings, tweaks, etc etc. Doing an OS reinstall is a right pain as you would well be aware of. Reloading data is much easier - you just have to make sure you have a reliable and frequent backup to restore from.
Which brings me to another point: backups. In my experience (all 30 years of it - yeah I know I am nearly pushing 50
) the simpler the backup the better the result. For that reason using a single large partition for Windows and then use ASR for backups (one reason I got WinXP Pro and not Home) means you have a simple no nonsense recovery mechanism. I use three external USB drives (250GB) each onto which I copy the ASR image. That happens the last thing before I go to bed. That way the system is fully backed up for the day. Otherwise you are going to need to remember to schedule backups for each disk independently which can increase the chance of something going wrong.
The point of separating os activity from other activity has merit but from my own experience with most PC systems (Unix servers behave differently) you are better off having them both on the same disk. Modern disk drives particularly the 7K60 or 7K100 fast disks and XP caching means the impact of an OS program writing to the same disk as your app would be (video capture being about the worst example) is better handled with one RAID disk than with two disks. Why? It has to do with disk write ordering, disk sync and disk controllers. The architecture of most PC's particularly laptops is such that the second disk is going to bottleneck anyway due to one of the above reasons. By tying both disks into a single RAID disk the bottleneck is then reduced to the throughput of the RAID controller not the OS or hardware design. Overall a RAID solution will give you better throughput.
On the issue of fragmentation that happens on either disk - OS and/or data. Most of it is due to the way WinXP/NTFS allocates sectors. Since Microsoft refuses to release the code for NTFS nobody outside them can tell if it is an efficient use of disk resources or not. I would say they have tried to make it work as efficiently as they can. Just be aware that fragmentation is not necessarily a *bad* thing. It can actually speed up a system due to the way the task load causes the disk heads to move across the disk anyway. We rarely defragement our Unix based RAID disks for this very reason. Often they are slower after we do so.
