There are a few different ways to do this.

I only have 2 hard-drives, but I've managed to keep things clutter-free.
"C" drive is my system and apps.
I partitioned my second hard-drive into D(Media) and E(Projects).
"D" is all my media for Vegas and Acid. So there I put all my loops, pictures and the textures downloaded from MC's website. Acid's 8-packs and Get Media material is stored here.
"E" is all my projects. Anything I'm currently working on is stored here, such as unfinished Acid/Vegas/Sound Forge projects.

M

The way you work is the way you work - much depends on personal preferences, how you like to organize things.

One thing that is often true, is you don't want to do video (if you can help it) on the same drive that holds your windows install. It's possible, and there really aren't that many drawbacks on today's faster systems, but trust the common wisdom that a smaller drive for system type stuff is cool, and for a lot of small reasons.

Programs on a separate drive should help, not sure how much, as if you have a bunch of software and windows on the same drive, the heads reading the disk have to jump back and forth a bit - contrast this with reading from one drive and then another.

With video editing/processing, my personal preference is to use more, smaller individual drives (not partitions), and tailor my workflow so that when possible, I'm reading data in from one drive, then spitting it out to another, for the reason in the paragraph above. This does save a ton of time.

But you asked about downsides originally... It's more expensive, more to keep track of, and you have to account for however many IDE channels you have available. If you stick your brand new, UDMA 6 drive on the same channel as your old UDMA 3 or 4, or worse your CDROM, you might see the faster drive's benchmark's drop, might not be able to have UDMA 6 and so on.

Most software is designed to install on the C drive. If you change the default installation, it might work fine, until you do an upgrade. Then usually, in my experience, the upgrades will look to the C drive for certain files and the application. If it can't find it, it will not be happy.

I have found that staying with the default install locations will save many headaches down the road. Any gain by having your apps on different drives will probably be minimal.

You should have your video files (captures, etc)on a seperate drive, and not just a seperate partition. This will make file management, as well as system efficiency at an optimum.

DaveT2

Much the same as what others said earlier.... I use 3-120 gig hard drives. 1 for system and apps and the other 2 are a dual-channel video formatted raid-0 for media.
My 2cents worth.....

here's how I do it:
drive 0, partition 1: boot drive with OS and appliciation files
drive 0, partition 2: data storage
drive 1, partition 1: page file
drive 1, partition 2: TEMP file, scratch files
drive 2, single partition for video editting

this arrangement does several things:
1 it forces the page(swap) file to be at the head of the disk where disk IO is fastest

2 having the pagefile on a seperate disk allows simultaneos read/write from page and either data or application disks. it improves speed(disk access time) and mitigates read head dithering/wear

3 it forces routine writing to HD to a drive other than my boot or video drive. this saves fragmentation of my boot drive.

4 forces applications the work from a scratch or disk buffer to read/write to a different HD from the application or video drive

My setup:

Drive1: 120GB
partition 1: "System" 8GB for system, applications and swap
partition 2: "Data" documents, pictures, downloads and Vegas projects
and video files that are used in several projects

Drive2: 160GB (removable)
partition 1: "Media" Video files and backup of Vegas projects