I was wondering that is it possible and how to make partitions for an external HDD??
Yes it is possible, and it is done in just the same way you do it with an internal hdd.
In XP just add the drive and let it be detected by the computer.
Start -> Programs -> Administrativ tools -> Computer Management
Double click on Storage and you should see it there as a new harddrive with no allocated space. Click on it and set it up the way you want it...