I have all my important docs/files on D (backup/storage drive).
If anything fails, I wipe C and clean install Windows.
I regularly backup my important settings such as ICQ, mIRC and other apps which require customising (to my own personal preferences), so I don't have to do it all over again if anything crashes/blows up
That's my regime,
Install Windows to C:
Allocate 2-5GB to C, if you're making partitions
Have all your 'working' files on D:
Everything is stored to D:
I have weekly backups of applications which are customised, settings, etc (don't forget FlashFXP

) and I rar them all up, and store them on my D drive.
Works for me, no CDs, no mess, fast retrieval if anything happens, I just have to format C, install windows and restore everything (install apps, etc) and overwrite/replace existing (or default) application settings with the ones from D
