Partition, Partition, Partition!
I have a 100 GB drive and I run 3 partitions. C: is 20, has OS and program files. D: is 70, which holds all my stuff, and E: is 10, and I ususally keep a backup OS on it in case I need to go in and delete something that's affected the primary OS. Plus, if I do need to format C:, I don't have to worry about backing anything up.
Those are all on the same physical drive.