Currently I have a setup with 2 hard drives running in my computer (both SATA). My C drive (labeled XP) has ONLY the operating system on it, My E drive (labeled Data) has 4 folders Game Data, Music Data, Video Data and Program Files. Everything I install, I install to the E:\Program Files directory and create short cuts from there to my desktop. And I back up all my data in the other folders (however those are only back ups not install directories).
My Question:
When Windows 7 is released and I install it on my machine (on my C drive because it only stores OS's) will I be able to create shortcuts from my C drive and play my games straight from my E drive with no questions and no hassle?
Assuming you're running XP (which I infer from the fact that it's the label on your C drive), no. You cannot do an in-place upgrade from XP to Windows 7 - and if you do a fresh install of Windows 7 on your C drive, the programs sitting on your "E" drive won't be "installed". Installation includes setting up the Windows Registry (as well as a bunch of other configuration information), which resides on the OS disk.
There are some programs, generally simple utilities, that can be run just by copying files onto your system without having to run an installation program. Those kinds of programs should be able to work - but anything that had to be "installed" under XP will have to be re-installed under Windows 7.