If I understand your question correctly, you can reformat the partition in order to 'blank' it out and free up the space for installing your image.
Go to: Start > My Computer > right click on D: > Format
However, I don't think installing a second OS from a ghost image is going to modify your boot.ini file. If you were to install the OS from the original disk then your boot.ini file gets modified, and as you boot your computer you will be given the choice of which OS you want to boot to, with one of them being the default OS. If you make no choice, then the computer will boot to the default OS. But again, you may have to modify your boot.ini file in order to be given this choice because of the manner in which you are installing the OS.
Plus if it is Windows XP, it will probably need to be activated.
This is interesting to me, though. I have never done exactly what you are trying to do and would be very much interested in knowing if you had to alter the boot.ini file, and if you needed to activate the new OS.
EDIT: I just reread your post, and if you are trying to combine C: and D: into one C: partition, then yes, you will need a third party program such as Partition Magic.
Edited by Albert Frankenstein, 30 November 2006 - 02:12 PM.