bigd480: I personnaly think that having a seperate partitions for the OS and for data is a good thing, as its safer, cleaner and can result in a faster operating system (if the OS partition is on the faster part of the disk). When doing a clean install with those, you can just FORMAT C: then reinstall windows, and you're all set. Try to have NOTHING besides native applications on that partition, ie not even My Documents. You can use
TweakUI 1.33 to change the location of most system directories, including 'My Documents' and 'Program Files'. The tab to change those is 'My Comptuter' when using TweakUI. Change them as soon as windows is installed, so you can be sure you don't install anything in c:\program files or put anything in c:\my documents.
If you're using outlook express (and maybe outlook), you'll have to manually backup your important mails before formatting, as it stores them in c:\windows\application data\blabla, IIRC. I'm not sure if you can change the location of that one, as I don't really use it myself. But, besides that, all your important information will be saved on another drive, so formatting will be safe.
Personally, my drive (2x20 in RAID0) is organized that way:
C: Win98SE - Fat32
D: Windows 2k - NTFS
E: 2K_Stuff - NTFS
F: 98_Stuff - Fat32
G: Shared (For 'My Documents', among other things) - Fat32
That's it. Hope this help!