I am not very familiar with Linspire itself, so I cannot comment on it directly. However, Linux systems are very capable of being installed and dual booting. You are absolutely correct that you will need a separate partition for a Linux install. I have used Partition Magic on Windows XP, so there is probably some issue with a running app that you will need to sort out. The other alternative is to wipe the drive and reinstall Windows, and as part of that install, configure the drive.
While doing a dual-boot install you'll use GRUB, which Linux uses to configure dual-boot installations. It usually goes pretty easily, with the GRUB install and configuration handled automatically.
Another alternative to the whole dual-boot environment is to use a Live CD of Linux. This allows you to use Linux without doing a hard drive install. Knoppix is a well-known Live CD, although there are others as well. For more advice from Bernard about dual partitioning with GRUB, click here.
This was first published in October 2005