I found the problem, I am posting my fix in the hopes it will help others who run accross this problem.
Alot of hard drive space was recovered for partition one.
To fix partition two I had to take the following steps:
-Copy all files from partition two to a temporary directory on partition one.
Run Windows XP SP2 install by booting from the cd
-Destroy partition two and recreate it with the unused 80Gb which was previously assigned to an old dual boot XP/Vista installation.
-Quick format new partition two and cut+paste everything from partition one temporary directory back over to partition two.
Now partition two allocates space correctly.
The next step was cleanmgr and ccleaner for the registry to be fixed.