I have two hard drives (win xp is in an enclosure and connected by firewire) and a blank drive which I intend to install Mandrake 9.2 (ide channel 1). With this setup do I need to worry about any boot issues if I have both drives running? Will I be able to transfer files from windows to Mandrake and vice versa? Am I making this too difficult ? I could just put both drives on the same ide channel but I had some trouble with that the last time so I just want to make sure everything goes smooth.

Firstly, Linux will not be able to write to a NTFS drive. It will be able to read from one however. You could create a third sharing partition using FAT32. This partition will enable sharing files between the two systems back and forth. I just wrote another message about dual booting using the XP's ntldr program. I'll paste them below.
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If you use the NT Loader that XP uses to boot into lilo, then if you decide to get rid of linux later, you will only have to delete a line that you added to c:\boot.ini.

Here are abbreviated instructions:
During setup, write the lilo bootstrap loader to your root partition. If linux is on another disk, then you sellect the mbr of the linux disk.
Enter to the console screen just after this point, <ctrl><alt><F2>, then you can copy the boot-strap sector to a file on floppy disk. Suppose that you installed lilo to /dev/hdb.
First mount the floppy somewhere: mount -t vfat /dev/fd0 /mnt/mnt/floppy
Then copy the sector to a file: dd if=/dev/hda5 of=/mnt/mnt/floppy/linux.lnx bs=1 count=256
Unmount the floppy: umount /mnt/mnt/floppy. Now you can finish the setup <ctrl><alt><F7>.

After installing Mandrake 9.2, you need to add a line to XP's c:\boot.ini file.
Boot into XP.
Change the attributes of c:\boot.ini: attrib -s -r -h c:\boot.ini
Add the line c:\linux.lnx="Mandrake 9.2" to the end of boot.ini
Change the attributes back: attrib +s +r +h c:\boot.ini

Note: The name of the boot sector file is arbitrary. So is the description "Mandrake 9.2". Replace /dev/hdb with the partition that you installed lilo on.

If you change partitions later or re-write lilo, you will need to recopy the lilo boot sector to floppy, and copy the file over your old "linux.lnx" file on the c:\ drive when in XP.

I hope this helps. I installed Mandrake Linux 10 Beta 2 a couple night ago, and this is how I did it.
I installed Mandrake to /dev/hdb. XP is on a raid array the linux doesn't even see, and it still boot this way!

Oh, I almost forgot. The kernel is too big to fit on a floppy disk. You could create a lilo-boot sector floppy which will boot the kernel from hard drive.

What I did is make a Rescue Disk CD. I used a small 24 min. CDR.
The command in root to produce the iso image of this CD is:
mkrescue --iso

This will produce a rescue.iso file. I then used the k3b program to burn the cd.