Brenden,
My preference is always to run editing projects on a separate physical drive from the C: drive that has the operating system and the editing program. This overcomes all the problems that you have had with partitioned drives and is generally regarded as 'good practice'. Your 80Gb drive would be more that adequate as a C: drive if you run your editing projects on separate drives (you haven't said how big your projects are).
If you want the best speed for your C: drive invest in a SSD (Solid State Drive). The 60 gig ones are now down to less than £50 and 60 gig is plenty for Windows and Vegas.
Hard drives that are directly connected to the motherboard (ie true 'internal') will allow faster data flow that those that have their data squeezed through a USB connection.
You have lots of RAM on your motherboard but your 32 bit Windows will not be able to make full use of it.
Ray
Yes, I mean install Windows and Vegas on the 80 Gb (or on a new SSD) and have your editing projects on a separate physical drive. For 5 min projects, 120Gb will hold several.
Make sure that ALL the data to do with a project is actually on the project drive. As an example, if I was editing an interview with John Smith, I would create a folder on the project drive and call it 'John Smith Interview'. Within that folder I would then create the following folders:- 'Project Files', 'Captured Files', 'Rendered Files', 'Titles', 'Stills', 'Music' and 'DVD'. Then, when starting the first project file, I would Save As in the Project Files folder. The camera files (captured or transferred) go into Captured Files, the opening music into Music, the opening captions into Titles, etc, etc.
Not only are my editing projects on separate physical drives, but they are not even in the computer unless I want to work on them. For about £20 from Maplins you can buy a simple SATA drive bay where the bare drive simply pushes in and is locked in place. As far as the computer is concerned it sees an internal drive, so data transfer is at full speed. When you have finished editing, or if you want to send you computer for servicing/upgrade, take out the project drive and put it on a shelf or in a cupboard - safe and secure, and you will never lose another project again !
Ray