This is a very good idea mouser. You mentioned two alternatives: a separate computer or one computer with virtualization software. A third to consider is one computer with a physical SATA switch, like this one
http://www.thesataswitch.com/ , to switch between two separate (sets of) harddrives. I have a switch like that but for PATA. Pic above website:

drawbacks:
- you can't flip between host/virtual OS, you must shut down and reboot
- requires tinkering/soldering
advantages:
+ less costly and space consuming than buying an extra computer
+ more complete separation between the two systems compared to virtualization software (First, the software might have bugs that allow things to break out of the guest OS into the host. Second, if malware makes it onto the host then it might be able to keylog, do screenshots etc in the guest OS window too. The risk for that is low I think, but why not remove it if it comes easy.)
+ requires tinkering/soldering

Netbooks are becoming so inexpensive now that getting an extra one might be the overall best option though. You get better portability. With a separate computer you can also use some KVM switch to use the same keyboard, mouse and screen for regular and secure PC.
It sounds like your intended use is mostly online transactions and server stuff, not things that need very specific applications. Then consider using some minimal Linux variety like Xubuntu or an even lighter one. That will cut down boottime compared to XP. The vanilla Ubuntu alternative installer CD has full disk encryption options so chances are the xubuntu one does too.
One more thing to consider: putting both the secure PC and another PC on the same LAN makes the secure PC more vulnerable to possible malware on the regular PC. Is there some easy way to separate them?