I only wish I could use more of the D: Drives capacity.
You can! The trick to using the second drive is to always select the "custom install" option whenever you install new programs. Then modify the install location to point to D drive and the folder (or new folder) of your choice. Unfortunately, for programs already installed on C drive, you cannot simply cut and paste to move the files/folder from one drive to the other, you have to uninstall, then reinstall in the new location. Otherwise, the registry is not updated and Windows will not know where to find all the necessary files to run the program. So, to free up some space on C drive by moving your applications to D, uninstall then re-install, pointing the install to the other drive and folder of choice.
You can also create a new "My Documents" on D drive, then copy all the contents of your current My Docs on C to the new folder on D. Do not delete the My Documents folder on C drive yet. Then, on your desktop, right click on My Documents > Properties, and in the Target text box, enter the complete path and folder name of your new My Documents folder - it should be something like
D:\My Documents and click Move, and follow the prompts to complete the move and exit your way back out. This now tells Windows to use that folder from now on. Now go back to your Desktop and verify that My Documents takes you to D drive, and that your files are there. If all looks good, you can then use Windows Explorer and delete the My Documents folder on C drive. Note the new documents folder can be named anything you want, but sticking with My Documents is easy.
You can also move the location Internet Explorer saves the 1000s of temporary Internet files it uses, by using a similar method. Create a folder on D drive called Temp (or whatever makes sense to you). For IE7, go to Internet Options> Browsing History > Settings and click on Move Folder, then follow the prompts to move it. This will help keep the clutter off your boot drive. You should be able to do the same with alternative browsers.
So instead of doing this on the C: Drive do it on the D:
Yes.
Once all this stuff is moved to D drive, boot into Safe Mode and run defrag on C drive.
BTW, whenever I set up a new computer, I always create at least 2 partitions on my first drive with the first partition being 10Gb (15Gb for Vista systems). That becomes my C drive. I install Windows and all my hardware drivers on C drive - nothing else! Then I move My Documents, the Page File, and the Temporary Internet Files folder locations on one of the other partitions. From then all, any installed program gets installed somewhere other than C drive.
For systems with two drives, I do the math and set partitions so the last partition is set to 5Gb. Then I move my Page File to that last partition on the second drive. When the Page File is the only thing in the partition, you can let Windows manage the size and not have to worry about disk space, or fragmentation issues with that partition.