Robert, I have successfully used a two drive system.  I would suggest doing 
it differently however.  The reason is, that if you use a backup program to 
backup and restore copies of your drive, you want that drive to be as small 
as possible.  I use norton ghost on floppy disks to backup and restore my 
program drive for example.  Windows, and all my programs go on my C drive. 
it is much easier to change "my documents and all of it's children to the D 
drive.  You can even move outlook express there.  i don't use outlook, so 
can't tell you.
As far as your IE question, I sure like ie6 better, with out those extra 
tabs, but I understand that security is better in Ie7.  Your choice your 
risk.  My C drive is 40 GB, and with every program installed on it, their is 
still 24.8 GB free.  You do want to keep 25 per cent of any drive clear at 
all times.  I also use an external synthesizer, and have vocal-eyes on my 
backup and restore disks, so I know when the process is done.  kind of cool! 
I store 3 backups of my C drive on a portable hard drive, so I can repair 
problems rather than reformatting and re-installing drives.