I think I answered this via e-mail, but I'll share anyway!
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The C: partition that I am suggesting will give you some flexibility when booting more than one operating system.
First, if you want to "naturally" (the Microsoft way) dual-boot Win98 and WinXP, both OSes need to see the same C: drive, as both will put their boot files there. NOTE: You don't HAVE to install Win98 nor WinXP to the C: drive. You will likely get a prompt during the install that defaults to "C:\Windows" as the destination install directory. You can just as easily make that "D:\Windows" or anything else you want.
Secondly, you can put DOS-based tools like fdisk and scandisk there, just in case neither OS wants to properly boot later in life.
Third, I *purposely* don't want my OSes seeing each other. In case I get clumsy, I don't want one OS to destroy itself and then another. Therefore, each OS I run gets at least on partition to itself. With WinXP and Win98, I could just make one NTFS partition (won't be naturally seen by Win98) and one FAT32 partition (I can chose to not make it visible in WinXP). If I install one of the OSes onto C:, then that OS's files will always be visible and subject to potential damage from the other OS. I'm just protecting myself from myself.
Finally, I can make good use of the C: drive space for swap space (use the same disk space for both OSes, temp files, and Internet cache. Again, if these types of files are confined to C:, they won't mess up something else later.
-SUO