Have a home built computer which I partitioned the HD into 2 sections: 1 8GB section, the other section the remainder --280GB. Unfortunately, now i'm running low disk space on the 8 GB section which contains WinXP. I've moved everything I could.

My main problem is when i'm downloading updates for a game, it wants to store the data in a temporary internet file then transfer it to my 2nd partition. I get the download then when the transfer begins it says 'insufficient disk space'. How can i work around this besides wiping out my HD and reinstalling WinXP (i'm against this method b/c after my Dell crapped out, i built my own computer and had to get a key to install XP on the new computer. Misplaced the replacement key so it would be a pita to get a new key). Can i move my temporary internet folder into my 2nd partion or does it have to be in the partition where XP is stored?

Yes, it can be moved in IE or Firefox, or you maybe able to resize the partitions with Partition magic, or some other partition software.