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Using a partition manager to create a dual boot win 7 / win 2008 machine

I need to install Win 2008 server with Outlook Exchange Server 2010 to do some testing.

I have a brand new (still in the box) Gateway machine (Core I5) with Win 7 Home x64 pre-installed.

I'd like to keep this and setup a new partition to install Win 2008 on.

Do I need special software like partition magic?
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I tried the VHD approach but was defeated because my drive had a master boot record on it and not a GUI Table (whatever the heck that means)

I ended up Shrinking (as per the firt poster's response) my C: partition and then using that.

The VHD and going virtual are attractive options though but I didn't have the time to explore them.
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Thanks for the help guys. All suggestions were educational but I went with the simplest one (shrinkage!) to save time.