With regard to Linux - nobody ever got fired for going with Red Hat (I just installed it a couple of weeks ago and it was really a breeze), however I hear that Mandrake is now even superior as far as installation goes.
When installing Red Hat I recommend a Workstation install rather than a server install (at least if you're intending it to be a personal workstation and have dynamically assigned IP addresses (which will be assigned from your wonderful LinkSys router)).
Don't bother with another disk unless you just want more space - partitions are just fine. Allocate 250 Meg for root filesystem space, 200 Meg for '/home' and somewhere between 2-3 times your physical memory for Linux swap space (probably 2x since you've got 500Meg of memory).
And, last but not least, if the Linux partiation is not located at a small enough cylinder number on your disk then you may not be able to boot diretly from it. I ran into this problem with my notebook and found that you can instead have your system start to boot Windows, and add some lines in your Windows startup file (autoexec.bat as I recall) to cause Windows itself to boostrap over to Linux.
Happy Linuxing!