There are a number of good reasons to have multiple hard drives and only a few have something to do with more storage space.
For instance,
1. Place the windows swapfile on the first partition of the second hard drive (don't use an old slow hard drive for this). Given a decent drive, having the swapfile on a separate drive on its own channel will make your system more responsive.
2. A hard drive should be partitioned so files are better organized on the drive and backups are simpler. What I normally do is this,
Using one drive only:
First Partition (Drive C) - Anywhere between 8 and 16 GB for the OS (Probably Windows in your case) and other software that I consider critical. By "critical", I mean utilities that will enable you to correct problems (and you will have them eventually). Those include, a good antivirus (I like Kaspersky Labs suite), a registry checker/cleaner (Norton Windoctor is quite decent), data recovery tools (Ontrack Easy Recovery for instance), utilities to manage real and virtual hardware (like PowerISO, AnyDVD, Virtual Clonedrive, Norton Ghost, Nero, etc), a "driver" folder where I keep the original drivers and all of the subsequent updates.
Things that will never make it onto my boot partition are: Applications like MS Word, Office, Photoshop, Dreamweaver (or whatever you use to design a web site), etc. Those application belong in another partition. Keep reading.
Second Partition (Drive D) - Usually around 4 to 6GB. This partition is exclusively for the Windows swapfile and all the "Temp" directories that Windows uses, including "Temporary Internet Files" and "Temp" folder for each user under Windows XP. Note that Windows XP allows you to relocate those folders. Windows isn't installed until all of those folders and the swapfile are where they are supposed to be. Why do this ? because it will keep your system responsive. The crud won't be scattered all over the hard drive forcing the read/write heads to chase clusters all over. This partition should be FAT32 - NOT - NTFS. You gain a little bit of performance by using FAT32 instead of NTFS. Since this partition only contains files that can be lost without consequences, the safety features (and their cost in terms of performance) are unnecessary.
Third Partition (Drive E) - Usually around 8 GB. This partition contains the OS (again!) configured almost identically to the one located on Drive C. Why have this ? to recover from problems that prevent you from booting into Windows. This setup gives you a greater chance that you will have one functional Windows installation that you can use to repair the other one. Note: On my systems (when using a single drive), I now make this the default Windows installation (instead of the one in Drive C), the reason I do this is because a lot of viruses, spyware, adware and other unwelcome crud you may pick up on the net is written by inept programmers that hard code drive C ( as in "C:\WINDOWS\SYSTEM32\MySpywareJunk.exe") for the target location of their garbage. By booting from the installation on drive E, there is no effect on your active installation.
Fourth partition (Drive F) - Usually a large partition consisting of about 1/3 the total space available on the drive. This is where I place all of the applications. Things like MS Office, Adobe stuff (Photoshop, Illustrator, Dreamweaver), video editing software, and whathaveyou, goes. Since I use a lot of applications, I make this partition quite large (but LESS than half the capacity of the drive - read on for the reason why).
Fifth partition (Drive G) - Generally it works to be around half the size of the Drive F partition. This is where I keep all of my data. I move the "My Documents" folder to this partition and ALL of the documents/data that I create are ALWAYS saved on this partition. This makes it very easy to backup your data since it is not intermingled with other stuff (like the OS, temporary directories, program files, etc).
Last partition (Sixth in this case and, Drive H) - This partition is normally 1/2 the total (and real) capacity of the hard drive. The reason for this partition is two fold. First, the transfer rate of most hard drives decreases as you approach the outer tracks. This partition therefore segregates the slowest half of the drive. Second, I use it to store files that I access rarely but that I'd rather have immediately accessible instead of on a CD or DVD. Examples are mp3s and other music files, rips from DVDs that I haven't had the time to burn yet and any other file that isn't important and that is in the back burner as far as it getting my attention.
This last partition does contain several potentially very important files however. Once I have setup Drive C and Drive E with Windows and utilities, just as I want them, I use Norton Ghost to create a partition image of each and keep it here. I refresh these images as needed. If I have enough space I also keep an image of Drive F, mostly because I don't care to spend the time reinstalling all the applications (This is where a second hard drive could come in quite handy)
On a 160GB drive, the above works out to roughly
Drive C - (Label: System B) say 8 GB in your case
Drive D - (Label: Swapfile) 6GB of which 2GB are the swapfile right off the bat.
Drive E - (Label: System) say 12GB (This should be your main installation)
Drive F - (Label: Programs) 32 GB for programs/applications (Adobe, MS, etc)
Drive G - (Label: Data) 22 GB. Space for data you create.
Drive F - (Label: Attic) The area for seldom used files and Ghost Images.
I label each of the partitions as shown above. Since not only do I have multiple drives (as many as 6 hard drives at one time) on my system, they come and go as needed from a larger pool of drives. To keep track of which drive is which (which sometimes isn't obvious), I assign a short and different ID to each drive, and include that ID in the partition labels. For instance, if I had two drives, I could have a "D1 - System B" and a "D7 - System B" (if it happened that the additional drive had Windows installed on it - which they usually all do).
Why go thru all the "trouble" to organize the partitions like that ? because your system is easier to backup, easier to recover in case of problems and, last but not least, remains responsive even when the drives are almost full. I have an old system with a Celeron at 466Mhz - not exactly a speed demon by any standard - and it still more responsive than most of the systems I play around that are configured with one monolithic drive C. Of course, responsive is one thing, sustained throughput is another. That Celeron won't process digital effects or video in any decent amount of time but it will load most programs as fast or faster than most 3+ Ghz systems I have played with in retail stores (which sell so poorly configured, I suspect it is done on purpose).
If you have 2 hard drives instead of one, for a home system, and, assuming they are the same size, I would have the second drive with partitions C, D, and E, exactly the same as on the first one. I'd make Partition D on the second hard drive, the location of the swapfile for the Windows installations that reside on the first drive (which you would be booting from). That way your swapfile is on a different drive which should make your system more responsive.
I'd have an "attic" partition on the second drive just as on the first one. The space in between (what is F & G on the first drive) you can decide to split based on your particular needs.
Hope that helps (instead of confusing you)