In that era. the hard drive was partitioned and a small D: drive contained all the backup reset info. Somewhere in the Program Filrs under System Tools/Recovery/Doctor (something like that) there is a recovery program that sets it all rolling. Save all personal data somewhere else =USB memory stick is good.
This is the case for my '04 HP desktop and '06 Gateway laptop. I have reset the Gateway twice. It resets to factory settings fairly fast.
But, it's likely you'll spend a day going to MS site to reload SEVEN years of Windows updates. XP Service Packs, IE6 to 8, Media Player X to 11...Be sure and get rid of original bloatware antivirus and load MS Security Essentials- all you need and free.
Your mention of a separate OS disk may or may not be crucial, depending on if yours is set up as I described.