zabbat, with XP and if you are doing a fresh install, then you can format and partition the drives from the install sequence shown on-screen. You just use the arrow keys on the keyboard to move up/down to select the drive you want to partition then format it.
After formating each partition, come back to the C: drive, or "0" drive as it will be shown and install XP to there.
Once you have XP installed, up and running, then you do your formatting/partitioning from within windows and not from the XP CD.
Right click on your "My Computer" Icon and choose "Manage" then click on "Disk Management". This will show both your drives and any partitions you have. You can alter any partition on any drive except the partition that has your O/S on.
If your first drive has a partition of say 10gb and the O/S is on that, then that will have to stay, [Unless you use a third party software like partition magic or similar]. But the rest of that drive can be formatted and set up in separate partitions or left as a whole.
The second drive can also be left as a complete drive or sectioned into partitions as you wish. Also the letters can be assigned from here as well. If your second drive already has partitions on it and you want to alter or remove them, you can.
Lets say your second drive is divided into three partitions, right click on the partition you no longer want and select "Delete" this will leave you with 2 partitions. If you want to delete one of those then do the same again. After deleting one or more right click again and select "Format". This will format the drive or partition ready for you to use.
Hope this helps, if not please post back and I will try to explain further. j.