Well, for the well-bred and trained, using OSL2K or even fdisk (shudder) would work well, but for the beginner, using a software utility (like Partition Magic) may be the better way to go.
I bought it and have been very satisfied with it. Setting up an OS on a new partition is easy enough just by using the wizards and if you read some additional material in the manual, manually doing it can be even better. Plus, it comes with its own version of an OS loader called BootMagic. Although 7.0 supports WinXP, 6.0 should be sufficient if you're sticking with Win2K (note: 6.0 does work with XP)
2nd Note: If you're thinking about installing DOS as an OS, be very familiar with the stiff requirements that DOS has on its partition's location, size, and so on.
--Sir Sanjiyan
"To Earth's four corners,
Sakura blossoms abound.
Segmentation fault."