Hi All;
For Win7, I bought another internal drive, 500 GB Hitachi SATA. XP is on Disk0, and while in XP I intitialized and formatted the new drive and assigned it letter F: Then installed Win7 on disk1. When I boot to Win7, it reports Win7 on drive c:, XP on drive d: . When I boot to XP, it reports XP on C:, Win7 on F: .
Regarding backup - I am very, very paranoid

. I have critical data going back 20 years that I cannot live without, and I also HATE re-installing any OS. Here's what I do:
I have three external drives that I rotate. I use GHOST SS 2.5 to create images of (now two) internal drive(s), about once per month. I rotate the external drives, so that if the system AND the backup target crashes during the backup, I have another copy. One I keep in my car (in case civilization collapses and I have to get out of town fast). One I hide at home. The other is across town at work. I also run Mozy Home, set to backup EVERYTHING including the OS stuff - I like to be sure.
I've been using this system since Win95 days, and I have survived several disasters with zero loss of data and minimal time to restore.
To restore, I just grab the most recent external drive, boot from the GHOST floppy and/or CD, and do the restore. A few hours later the system is back in the state it was in at the time of backup. I then use Mozy to bring back the files that were written since the GHOST backup.
Raargh