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There's some information on how to get a fully encrypted filesystem working under Linux (which requires some juggling of partitions to get to work), but I'm not sure that it's possible to do the same thing with XP. You can't extend XP in the same way as you can with Linux or a open source OS, and XP doesn't have the capability to boot off an encrypted filesystem natively.
I think the best you could do would be to have you Windows folder on one drive, and then to use something like TrueCrypt to keep all your important information on a virtual encrypted drive. Unfortunately, modern OSes tend to be quite messy with their data, so you may find information that you want to be secure cached in RAM or something.
I'd be interested if anyone discovers a way to do this under Windows, but I don't think it's possible to do what you want with XP without some form of virtualization.
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