DIRTsquirt,
NTFS vs FAT32 is irrelevant.
Linux uses its own native filesystems (which are at least comparable to NTFS, if not clearly better). For Red Hat 7.2, ext3 is the default, and it's a good choice.
You don't really need Partition Magic to format fresh filesystems in the partitions you're creating. You only need it to create the partition "slices" since your drive is already partitioned. As you probably already know, in the past, it was difficult if not impossible to repartition a live drive. Partition Magic doesn't even currently support formatting ext3 as far as I know.
Again, you just need Partition Magic because it makes it easy to create new partitions, while not affecting the 10 GB NTFS partition already on the drive.
Okay, now that partitioning is described, installation can begin (and it's really not that difficult).
According to Linux, these are your hard drives:
/dev/hda Master on primary IDE
/dev/hdc Master on secondary IDE
As an example, your partitions will be labeled on such:
/dev/hdc1
/dev/hdc2
/dev/hdc3
One of the earlier steps is to format hdc1 and hdc2 (the filesystem types are ext3 and swap, respectively). Then all you have to do is specific hdc1 as the root filesystem, and hdc2 as a swap partition. hdc3 is your 10 GB NTFS, and not affected by Red Hat. Note that the naming scheme I showed is the simplest case; depending on your partitioning scheme, it could be different. I suggest you read up on Linux partitioning to understand what's going on.
I'll fast forward to the end, where after Red Hat has installed all the necessary files, you have to decide how to boot Linux. For a newbie, I would recommend you use a boot floppy. At this time, do *not* install a boot loader to the MBR (which is on your 100 GB hard drive) since you really don't want your existing setup to be affected yet. To boot up Red Hat, you just have to use the boot floppy. Once you're more comfortable with Linux, you can integrate Linux + W2K into the MBR boot loader.
Btw, n0cmonkey gives correct advice that you need good backups to ensure W2K is safe.
However, don't misunderstand the alarmist impression this can leave. Linux installation is perfectly safe, and it will only copy files to the partitions you create and specify.
Obviously, if you instruct Red Hat installation to format /dev/hda1 (on you 100 GB drive), then you're in trouble.
If you don't have Partition Magic, Red Hat installation will try to work with you to create the necessary partitions, but I believe it won't be as easy or flexible as PM.
I'm pretty sure Red Hat has a nice HTML install guide on their web site, which you should definitely read through at least once if you're a newbie.
In conclusion, you'll need to learn some new things to install Red Hat, and you definiitely have to learn a not of new things to use Linux. However, installation is a relatively straightforward, safe procedure.