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For recording, partitioning is really bad. Think of it this way... partitioning a hard drive is a physical process... it's essentially saying 50% of the drive (the inner cylinders) will be C: and the other 50% (the outer cylinders) will be D:. So if you have your operating system on C and data files on D, every time you want to access the files on D the drive heads have to physically move much farther than if you hadn't partitioned the drive to begin with. Since OS files (particularly virtual memory) are accessed quite frequently, the drive heads spend a lot of time travelling back and forth, which is wasted time that results in reduced throughput.
If I were you, I would unpartition the 40Gb drive and put the OS and games on it, then dedicate the 120Gb drive to recording. Or if you don't plan on doing a ton of recording, reverse them... put the OS and games on the 120Gb drive and use the 40Gb for recording. But from a sheer performance perspective, partitioning is not a good approach to take.
That said, with lots of files on a single partition, regularly cleaning up old/temp files and defragmenting the drive becomes really important!
--B
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