Hi dealer. I wanted to get a little involved with this thread because I've partitioned using Partition Magic and I want to share my experience.
I have a 27.5GB harddrive. I went with FAT32 because it seems like my system performs better with it. At PCPitstop I record higher cache speeds.
I made an 8GB partition for my OS and programs. I know alot of people prefer having their programs placed on another partition when they partition, and I never could understand that, because Windows will always place common dlls and files along with the OS partition anyway, (To prove this, try moving your system program files to your data partition. You will have duplicate system files.), and if you have to reformat, you're going to loose your programs anyway, because they are tied to the registry.
My reason for partitioning was in case I need to reformat I won't loose my data files (videos, music, some text files, and program installation files).
My solution to loosing my programs in the event of a reformat was to place the installation exe or zip files in a folder on my inactive data partition. That way, reinstalling them is just a click away instead of long search on the net for the programs.
I'm very happy with the way I have things set up.
As far as file placement, I use Diskeeper. Diskeeper I noticed, places your files closer to to front of the disk for you, which I think is the proper placement for speed. (dealer and I can disagree about this and still be buddies.
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Partitioning has also made defragging a faster process because my really large data files are not on the partition with the OS.
Defragging the data partition is pretty much a snap, too.