In the installation booklet thing that came with my linux distro (RH8), it says something like this about partitions.
the minimum number of partitions should look like this
swap (a swap partition)
/boot (a boot partition for operating system kernel)
/ ( the root partition * what you need !)
so my advise would be to take a part of that large ext2 partition (i would go for all the 7GB if i were you .... but that's just me), and allocate some for / and everything should work out fine.
Hope i could be of some help.