Hello,
I am currently running windows xp and i want to
set my computer up to be able to run both xp and
Ubunta. I was wondering if this "ntfs-3g" partition
is a good way to achieve this?

thank you

ntfs-3g is not a partition. It is a tool that linux can use to read and write windows ntfs partitions. However, I don't think that ntfs is linux bootable, even with ntfs-3g - and even if it were, I wouldn't recommend it.

So here's what you DO want to do:
1) Defrag your windows computer
2) Grab a copy of the GParted LiveCD and use it to create a new partition.
a) Shrink the windows partition.
b) Add a partition to the end of type ext3.
c) Note the label of that partition. Usually it's /dev/hd_ where _ is a number
3) Install Ubuntu like normal. Put Grub in the MBR and Ubuntu will detect Windows.

should I do this with my external HD also?
do I use GParted to shrink the windows partition?

thanks

You don't have to touch the external HD. GParted is just a pretty easy-to-use interface to a variety of tools that do things like shrinking, growing, moving or otherwise changing partitions. Each partition of a hard drive has a file-system on it. NTFS is the one that is specific to Windows. The trouble is that when your computer came to you, the people installing thought you would only use Windows, so they put ntfs on the whole thing. You just want to make enough space for linux, so shrink the Windows by however much space you wish to give Linux.

My message didn't format correctly, I meant a,b,and c to be sub-instructions of 2, so further clarification of 2, not independent steps. So yes - use GParted to shrink the ntfs partition.

You can get the GParted LiveCD here:
http://gparted.sourceforge.net/livecd.php

it's just like partition magic, but free and (imho) better.

thanks again,

Is there any way that the two OS's would be able
share space, or access each other's files?

Also, I'm not sure what Grub is, or how you put it in the
MBR

The good thing about GRUB is that you don't need to understand it. It's a bootloader, it lets you pick which OS to use when you boot up. That's how your computer knows if you want to use Linux or Windows. Trust me, the Ubuntu installer will make it easy. If you stop reading and click yes on everything, you still come out with a working system.

Neither windows nor linux can use each other's filesystems natively, but both have a way to.

For windows to read the linux partition, you'll need a driver from here:
http://www.fs-driver.org/download/Ext2IFS_1_10c.exe
install that in Windows

For linux to read windows partitions, open a terminal and type

sudo apt-get install ntfs-3g

Then each can read and write to the other's partition. Regarding having them share a drive, hrm, probably not possible, and if it were - not advisable. Windows is not good at playing well with others.