"I'm going to create a blank index file in my chosen Index folder via notepad"
you should not create any file by the hands - this is one more suggestion from you - thanks!
So I discovered
To answer your questions:
1. I've only ever started indexing runs
2. As above - folder to index
3. Volume is NTFS
4. Docs are doc, docx, xls, xlsx, pdf, ppt, pptx, txt, and others
5. I'm running Windows Firewall and Webroots Internet Security Essentials
6. XP Pro Sp-3