Reverse though
I believe the thought process is more like this:
Install Windows XP on the C: Drive
Install all additional software on D: Drive
As an added bonus, this also prevents alot of odd errors/malfunctions in poorly programmed applications because they often assume the Windows directory is on C:
In reference to the pagefile - I find I have better performance increase if the page file is on a seperate physical disk from the OS. My synthetic benchmarks showed a notable improvement. As far as fragmentation goes, you have to kill the page file all together, reboot, defrag the drive that housed the pagefile, recreate the pagefile on the desired drive, and finally reboot. Its really not possible to prevent the pagefile from becoming fragmented over time.
C0d3Warr10r