(1) if you use FirstDefense, then your OS partition is tiny. (about 10 GB), so it's fast to upgrade the image.
(2) if you want to do a fresh reinstall of the OS, your data will be there, no need to copy them again
(3) it's just clearer to see how much space you allocate to each thing (programs/data)
I'm sure there are more...
BTW, thanks to all who answered. I reinstalled and now have a C: partition. My data partition used to be E: (and all my ahk scripts, etc assume E:). However, in my new install, E: is nowhere to be found (!). No partition/CD etc, has the E label, but still not available in the dropdown list. Anyone knows how to bring it back?