There have been partition debates on PPRuNe before. Gotta say I'm a partitioner, with the caveat that I don't think having multiple partitions on a smaller drive is very useful. I wouldn't suggest having a partition smaller than 30GB unless for special reasons - things grow, and it's a nuisance to run out of space. Separating data from the OS seems to me to be a good idea (though of course Windows doesn't do this by default) and a C: partition for the OS and a D: partition (think Data) is a good start. It certainly makes backing up and defragging much quicker and easier.
I have 4 30GB partitions on the main machine:
1: WindowsXP OS - NTFS
2: Shared Data - FAT32 (so that Linux can read/write)
3: SuSE Linux 9.1 - ReiserFS
4: Varies - experimental stuff, new distros etc.
I do prune things from time to time and hive archival stuff off onto CD and/or tape.
Just be careful creating/destroying partitions - you can confuse software terminally (Yup, I've done it).
Acronis software seems to me to be by far the best software I've ever found for backing up and fiddling with partitions - you can still mess up, but they make it difficult.