I prefer to keep only the OS and a few basic utilities, like antivirus, acrobat reader, monitor etc. on the C: partition. These days, with WinXPpro, I use about 10GB.
It may be mostly habit from the Win95/98 days, where this system had large benefits. But it feels 'cleaner' to me, keeps paths shorter and cleaner. And backing up the OS, and only the OS, is a breeze (major benefit with Win9x, but not perhaps now, with XP).
On one drive systems, I usually have 3 partitions. One small for the OS. One very large for applications. And one for 'storage', like media files, downloaded zips, etc.