I know Microsoft stated, especially for XP that everything should be on 1 partition. XP would arrange the data, what was less used was put on the end of the drive (or almost) what was frequently used on the beginning of the drive.
In my opinion everyone (who wants to) should have 3-4 partitions, if the drive(s) are big enough, or if you have a raid solution you probably have even more space at hand.
Here is what i would do (and do). My old Dell Pentium lll, 600 mhz has only 1x15k Scsi drive of 18 gb. So the O.S. (Win2000 Pro) is on a partition of 8,5 GB. The second partition is used for stuff not for daily use but also for Office 2003.
However with the large disks available now ( a few hundred GB), i would suggest to use at least 3 partitions, i use 4 on the main computer.
So why this thread?
Personally i use the C: partition for the O.S. like everybody does.
then comes the O: partition with office 2007 on it for Word, Excel, Access documents.
Then there is the J: partition for the jokes and video stuff i receive daily from some friends. I save everything so right now 8,5 gb.
Finally the R: partition for the music and other stuff like downloads only used for installs like Dreamscene or whatever is downloaded. Once installed you hardly reuse this again
The benefit of having the OS on a stand alone partition (nothing else on it) is:
when crashing and the OS needs to be reinstalled, the Office documents, the foto's, video's etc will still be on the disk. If you put everything in one partition and need to reinstall, well you can reinstall EVERYTHING that was on it.
But the most benefit you get from separating the O.S. is that when defragging, manually or automatically you only need to defrag the OS partition. It is that partition that always needs to be defragged. Not the data partition, here you can do it once in a while.
Secondly when only the O.S. needs to be defragged, it happens in maybe 10-15 minutes, a bit longer is drives are not fast.
Also, although defragging can be good, best is not to do this for the entire drive every day, even every week is not necessary.
Using more then 1 partition lets you organize things yourself. You decide wich partition(s) will be on the end of the drive. So the stuff used daily gets faster access.
However do not change your system if you are happy with it as is.