I don't have any experience with recovery drives/partitions...but it's my understanding that eliminating such or otherwise overwriting it may prevent future recovery efforts (using the partition) from succeeding.
Are you sure that you want to install an O/S on that partition?
If so and you lose your ability to use said partition in recovery efforts...do you have a MS install CD as a means of doing future repairs/installs of XP?
As I read your post, you say that you downgraded to XP already...does that mean that you have XP installed currently on your C: partition...and want to install another XP partition on the same hard drive? You want to do a multiboot?
I don't employ encryption at all so I know nothing at all about that. Out of curiosity, I guess that I have to ask what you think you gain by doing so.
Edited by hamluis, 20 January 2009 - 03:44 PM.