Have installed XAMPP Lite 1.7.3 at the root of the C: drive and all seems fine.
In general have preferred to have the data files on a different partition and keep the C: drive just for the XP Pro OS and the installed programs. It seems to make it simpler if it is ever necessary to revert to an earlier version of the C: drive using Norton Ghost, as no data is lost in the revert.
The other partitions are on a second, larger hard drive, with plenty of room.
Is there any reason to not reinstall XAMPP Lite at the root of one of the partitions on the larger drive, even though the PC would still boot from XP Pro on the C: drive?
That way the MySQL databases and PHP files would not be affected if it was ever needed to revert back to an earlier clone of the C: drive.