<< Since I confused you, I'll try and answer first.
There's been considerable discussion recently, on what the "right" size is for a swap file under W2K. Old school said: 2X amount of physical RAM. New school says: 1x amount of physical RAM + 12MB.
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Actually, it gets more complex than that.
XP, by default, uses 1.5x RAM.
The RAM+12 was necessary to get a dump under NT4.
There is no requirement that there be a pagefile on the C: drive (unless you need to get a dump).
You can have up to (I think) 16 pagefiles, but the GUI will only allow you to create one pagefile per drive letter. To get more than one pagefile per drive letter, you have to edit the registry. There's no benefit to doing that.
If you have C: and D: partitions on the same physical drive, moving the page file from one to the other will give you no speed benefit; it's still the same read/write head moving to another location on the disk.
W2K will ALWAYS page, no matter how much RAM you have. A poorly written app can't affect paging directly. It can allocate memory, and the OS will decide what gets paged when. But the app itself doesn't directly control paging.
A perfmon log can be used to help you determine where your pagefiles should be and how big they should be.
To answer the original concern, if your system is running low on virtual memory, it means that the system is running out of COMBINED RAM AND pagefile space. Most likely, an app is leaking memory. Again, a perfmon log can help identify the app. Making a bigger pagefile might temporarily alleviate the problem, but if you're running a leaky app, it'll still come back.
Of course, some programs (Photoshop, for example) require lots of pagefile space because they have legitimate uses for gobs of memory. If this is your situation, then enlarging the pagefile to meet the demands of the apps you run is a correct solution. Again: a perfmon log can help you determine what's going on on your system.