it's really very simple. when you install a fresh copy of windows, when it gets to the part where it asks which drive to install to simply chose the physical drive you want and make sure you tell it to partition the drive so that you have a smaller (10-20GB) partition just for xp. the first time i did it i chose 10gb, which really was enough, but i did run into some problems from time to time when trying to defrag, you need a certain amounbt of free space in order to get a good defrag, and with the 10gb partition there wasn't always enough.
i would recommend at least 15gb, and maybe 20 if you decide to leave your page file on the c: drive.
now when you get xp installed i don't remember if the rest of the space was already partitioned and formatted for you or not (had the same install for quite some time now). if it is not partitioned and formatted already you can do this yourself easily in computer management. simply select the unpartition space, and chose to formatt it to ntfs and chose the drive letter you'd like to use for it.
from there on all you have to remember to do is to change the drive letter to the other partiton whenever you install new software. i generally only change the drive letter on the install path, keeps things easier IMHO.
it's not a terribly hard process, but it definately makes things a bit easier down the road.
stuff like video, sound and mobo drivers i usually install to c:, if the os goes down i'll need to reinstall those anyways so it's not a big deal. everything else goes off to my F: drive.