You could dual-boot Windows and Linux. That eliminates the need to run a VM, which frees up space on your main partition. Second, if you run it in a VM, the guest OS is almost always significantly slower.
Most distros with graphical installers (e.g. Fedora, SuSE) make it terrifyingly easy to resize an existing Windows partition.
Before anything else: Back up anything critical, and be prepared to reinstall Windows (you would be writing to the hard disk)
Assuming your partition is NTFS, I'd make sure you have plenty of free space (at least 10GB)--then thoroughly defrag it.
Boot the Fedora/Suse install CD and use the partiitioner. You should be able to resize the NTFS partition by following the directions on-screen and adjusting the size in the window.
If the CD that you use to partition the disk has the distro (version of Linux--examples include Debian, Ubuntu, Fedora, Slackware, Mandriva, etc.) you want, go ahead and install it. If not, shut down the computer and boot the CD/DVD containing your distro.
If that fails, you may need to do a clean install of Windows and then install Linux. Yep, it's a pain in the butt, but the OS runs much better.
Virtually every distro installs a bootloader such as LILO (LInux LOader) or GRUB (GRand Unified Bootloader), that will have both choices available to boot.
That's pretty much what I thought.
I'm just noodling on how to get the machine set up so that a hardware failure doesn't leave me crippled, again; that was REALLY frustrating.
Right now, even though my machine is healthy and XP is working fine, with my past negative experience it feels like there's a time-bomb ticking away. I'm not prepared, nor do I have copious tracts of time to do the research and gather the software to become prepared, to engage the BS required to make XP boot back up okay after a hardware replacement.
Frankly, I'd rather just kick Bill Gates in the crotch, call him a bloody bastard and be done with it.
I need to investigate more.