Don't bother separating the games, you have to reinstall them if you decide to wipe out the OS anyway. You might make a partition just for your media files and personal stuff, but any apps have to be reinstalled with the OS usually. The size you decide on would depend on how much of each thing you have. If you store lots of media, make a bit partition for it, if you install several large games at one time, make that the larger partition. WinXP itself uses about 2GB, plus the swapfile would be about 1.2GB if you let Windows manage it. Figure that the newest games usually take about 1 to 2GB apiece, estimate your needs from there. Look at your current drive usage and see how much space each thing is taking up.
The only reason you might want to install apps and games on a separate partition is so that saved games don't have to be manually backed up if you want to wipe the OS; same for applications and saved data files. However if you just make sure your save games are saved to the data partition, it ends up the same way. Also keep in mind that your OS partition needs to be big enough to store more than the OS. Some programs install files to the main Program Files folder no matter where you select to install the application, and there's no way to override that except by hacking into the Registry later.
Also read this:
http://www.anandtech.com/guides/viewfaq.html?i=43 It's not applicable to every single person, but for the most part it does help with the decision.
You'll want to use NTFS, if you hadn't already planned to.