One benefit of creating an OS partition separate from data is that you can re-install your OS if you need to someday without overwriting your data.
But, it is not that simple.
There are programs that still store data on the OS partition. The default location for the "My Documents" folder is on the OS partition. You can change it.
The program you use for your emails may put your emails on the OS partition.
So, you have to be careful what you are getting yourself into.
The size your need for the OS partition depends on what you plan to do. If you plan to put all the programs on the other partition, you only need about 5G. The problem with that is the default location for the installation of a program is on C. Every time you install a program, you will have to remember to change it. Another problem with this is that if you re-install your OS, many programs that you have installed on the other partition may not run anymore since the dll files are always placed on the C drive anyway.
If you plan to install all the programs on C, you have to estimate how much space you need for the type of programs you are going to have installed. Only you know the answer. You can always change the partition size. But, it may need a utility like Partition Magic, which is not free.
How do you create 2 partitions?
Start the XP installation, when it gets to creating a partition for XP, change the size to what you want for the OS.
After installation, boot to XP and right click on "My Computer" and click on "Manage". Go to the "Disk Management" tab. Right click on the unallocated space shown on the disk map and click on "New Partition".