Dedicated HDD for OS?

Hello.
My current HDD situation looks like this:
Hard drive 1, SATA: Two partitions, one 10GB partition (Drive C) one 130GB partition (Drive G).
Hard drive 2, PATA: 40GB capacity

My friend has given me one of his hard drives since he just bought a new computer. This drive is 160GB, but, it is also PATA. With my motherwise I can only have two devices (that I can see) on PATA, and so I have my 40GB HDD and my DVD burner hooked up to it. I have 3 empty slots for SATA(IDE?) connections.

Since I have the extra SATA connections available, I am also thinking of buying a cheap 20-40GB drive that connects with SATA and installing my operating system on that. My question for you guys then is: Does keeping the operating system on its own hard drive improve performance at all? I have read that it can, but is it worth the effort?

>>1 With my motherwise I can only have two devices (that I can see) on PATA

Does your mainboard have one IDE slot or two? They make 2-device cables, y'know.  "Master and slave" sound familiar?

>>Does keeping the operating system on its own hard drive improve performance at all?

Sure. OS on primary partition should have better seek times because of its location on the drive and should be easier to defrag, backup, reformat.