Apparently you have two operating systems. One must be on C and the other on E. You must have a dual-boot system with a dual-boot manager that lets you choose which system to load on each startup.
If you delete the main folder and subfolders of the Win 2K operating system on your E drive, it is clear that Win 2K will no longer work. However, I think that a proper uninstall, if possible, will give you better results than just deleting the operating system and its folders and subfolders.
Deleting OS folders usually leaves a lot of other files related to the defunct operating system scattered in different folders of the drive or partition, and this will impair drive performance and/or give you error messages. In addition, you wouldn't be freeing up as much space as you could.
If you just want to keep Win XP and as long as it is installed on your C drive, you should get rid of Win 2K in the best possible way. That is, you should try to uninstall it correctly rather than delete it manually folder by folder. By uninstalling it properly, you shouldn't lose any data folders on your E drive that you might wish/need to keep.
You should also read the Win 2K help in order to see how it can be uninstalled.
If you can't find an uninstall option for Win 2K under Add/Remove programs, then you have to determine what folders you really need to keep on the E drive before deleting Win 2K manually. After that, you can proceed and delete the Win 2K folders, being careful not to erase those folders containing personal data and info that you want to keep.
Finally, if you have a dual-boot manager (that is, if every time you start or reboot your system you see options asking you to choose which OS you want to use), you should uninstall that, too. If you keep only one OS, there's no use in having the dual-boot manager anymore. It might give you errors on every boot if you keep it. Anyway, if it doesn't cause trouble, you won't need it, so uninstall it, too.
In the upper right-hand corner of this page there is a search option where you can type in relevant words (such as "uninstall win 2000" or something like that), then choose the Win 2000 OS in the drop down menu next to that box, and click on "Go search". This will let you find other posts that might give you more info on how to do what you want.
Good luck.
Juan