|In most cases you put them on different partitions. They could in many cases exist on the same partition. I almost never do that.|
There are good other choice for most people. You can run a (or many) virtual machine(s). Look up virtualpc and virtuabox and vmware's programs.
"Best Practices", Event viewer, host file, perfmon, antivirus, anti-spyware, Live CD's, backups, are in my top 10