The hidden partition holds the Windows Recovery Environment to assist you when things go wrong. If you are confident that things won't go wrong, and it's taking up a significant proportion of your hard disk then you can avoid it during installation. But if one or two hundred MB is a significant proportion of your hard disk I would suggest that you need a bigger drive.
No, I'm ok w/ the disk space. I'm just curious what it brings over System Restore. I have used System Restore successfully in the past to revive xp after installing an erratic driver or app. Plus I image my boot partition regularly.
It's mainly for when you can't even boot into Windows to use System Restore. If your image software will work by itself, without having to go into Windows, it's probably an acceptable substitute. But, as with any backup regime, you would be wise to test it before you have to use it in earnest. There are valid reasons, other than space, why you might not want another partition, but if this doesn't pertain I would be inclined to leave it.