dustonian,
To help answer you query, you can use Win XP to partition your HDD, but not to reformat. As XP uses NTFS, there's noi reason why they would include a tool to reformat to FAT32.
a long way round would be to use the XP CD if you have one, run it and mess with Fdisk (provided you know the commands to resize, reformat etc.)
However, something like Acronis Disk Director 9 is absolutley ideal for doing this. As you don;t appear to have installed Linux yet, why not google for a cheap second hand copy of DD9. I use this, after beating my brains out with PartitionMagic which would continually goose my system (HP Pavilion t760 UK edition) and it is invaluable kit for dual booting, partitioning on the fly etc.
Use DD to resize your XP box, but leave the space you want for Linux UNFORMATTED and trust your Linux distro to do this for you. I've not used DD to format in Ext2, Reiser etc because of the awful experience I had with PartitionMagic. Leave it to your native Distro to do this.
To get more up to date Distros, try
http://www.uselinux.co.uk to order cheap DVDs and CDs of freely available Linux Distros, including Peanut, Suse 10 OSS, Mandriva, etc. Saves hours of FTP or HTTP downloading (esp if you don't have a cable or T1 connection).
I agree with usaf_sp, you have a pretty new high powered laptop there, and 8.1 is a few years old, so you might find it'll not make best use of your kit.