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.
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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.
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