Two drives labelled D sounds odd indeed. Where are you seeing that? Is that what the machine is calling them, or is that labels you gave them when you set it up?
You'll be hard pressed now to find XP for sale, unless you already have it.
If you're planning to plug in an Ipod and have a decent digital camera, my inclination would be to keep the old machine as a fileserver (for the time being) and buy a new, modern one with all the kit for the Ipod etc. You may have to put up with Vista for the time being, but Windows 7 is moving along fast (I'm running it now, and it's excellent).