I always tell people to have two hard drives. The first one should be ideally faster and no larger than needed (well, size isn't as big an issue now).
The second one is the largest depending on need. Speed is not important. The Western Digital Green 1TB is ideal.
One or two partitions depending on how many files are to be installed (like games).
One or two partitions. Create a folder for backing up the entire C-Drive with a program like Acronis True Image. Make a first image of a BARE Windows installation, a second with all the drivers installed and possibly Office etc and a third later on when all your programs are installed and tweaked. Add a fourth later on that you can update or simply delete and redo your backup. Choose 4.3GB file sizes (don't bother burning to disc) and the second from highest compression ratio. Major software issues? Primary hard drive failure? No worries, simply insert your Acronis boot CD and RESTORE. A bare bones Windows XP reinstall took me four minutes. A much more advanced Windows 7 one took me 45 minutes (including verify) but involved one minute of labour.
You should also backup your data periodically to that SECOND hard drive.
While I'd NEVER, EVER share my entire C-Drive, are you sure you can't? I'm currently in Windows 7 and right-clicked the C-Drive->Properties... Advanced Sharing, and YES I enabled it. I then disabled it.
I plan on streaming media to something like the MViX Ultio. I'd install a 3.5" hard drive into it but I'd also allow it to access my computers second hard drive until I end up with a dedicated home server (too expensive currently). So my shared file folder will be something "E:\Media Files\"