New build partitioning and system restore advice needed

I had a couple questions about my first build. Any advice would be appreciated.
1) One of the computers someone build for me years ago had XP installed on a smaller partition just by itself. Any apps, games, etc. I needed to install went on a second, bigger partition. Is that the best way to do it? Does it keep everything defragged better with installing/uninstalling/moving, or is it fine just to throw everything onto one partition? If it should be separate, how big should the XP partition be?
2) I just got finished helping a friend try and remove a nasty rootkit on his laptop. We ended up just using the system restore that came with the Dell, which keeps a factory image on a partition. What's the best way I can do this on a desktop? As in:
- what program?
- how big will the partition need to be for the intital install image?
- how can I keep the image on the partition from being corrupted from any virus I might end up with?