You should find sufficient advice from others here on the partitioning bit but as far as Wine is concerned, allow me to interject one tid-bit.
Once you are set up with Linux, go here:
CrossOver Linux from Coed Weavers
Read all about it then buy it. It is not expensive but is sooo much better than trying to wrangle Wine. It uses Wine as its base but has been done over with a beautiful interface that makes using Wine a breeze.
great. thanks so much.
Also, VMware Server is free. You just have to DL it.
As far as your installation issue, I'm honestly not sure. I've never actually installed Linux on the same drive as Windows before. I tend to put it on it's own drive.
Let me do some searching for articles on how to do it. I know the information is out there.