You can make one drive appear as a directory on another drive in Win2K - I don't think that you have to erase or format either drive for this to work.
Go to Settings->Control panel -> Administrative tools -> Computer management -> Disk management. Select the drive you want to make into a directory, and right click 'change drive letter and path', then enter the name of the directory you want.
You can join the two drives into 1 drive letter - using either spanning or striping. In the former, the 2nd drive is used when the first is full. In the latter, data is stored in small chunks on both drives, which can give slightly improved performance over 1 drive. Bear in mind that in both of these modes, especially striping, the failure of one drive can lose all the data on both drives.
I can't remember the procedure for creating striped or spanned sets - but both drives must be formatted as 'dynamic' volumes. Note that you cannot boot from a striped or spanned drive letter - If you only have 2 drives, then you will have to create a boot partition on one, and then have a seperate spanned partition - this will mean that you still have 2 drive letters for you hard drives, so I suspect that this is not what you want.