As long as a hard drive is positioned carefully and has ventilation, you can fit it anywhere. To save your xp data, simply use gparted to create a spare partition and move your data from the c drive to the new position. You can then resize the c/ ntfs and reinstall xp, with only one drive connected. Then connect the second drive, and reboot windows.
Next load your linux to the second drive and direct the boot loader to the mbr of the same drive. If you mess up linux, xp is not affected. One of the best points with linux is you create a separate home partition, and can reload your os without losing anything.
With xp, i limit the c/ partition to 60GB and use the balance of the drive for data etc.