yep.. it actually took me a few tries to get mine set up with xp & 7, because my hard drive is only 40GB! 20GB each for me!
-edit one of these days i want to install Linux, as well. when i get more space then i can try the Linux world too!
use the live version ,it runs fro the disk and ram ,no need for hdd space,with some live cd's you can even burn it to the dvd in what is refereed to as multisession dvd ,and you can save changes you make like browser settings and things like browser favorites and email ect ect , i made these myself about 6-7 yrs ago
more info at puppy linux.
http://puppylinux.com/multi-puppy.htm