I've not had issues using GParted.

My concern was with the "shrinking" part. I hear that can cause problems if
not done correctly.

Any operation on partition has the chance of it messing up so it's a
wise move to make a backup of your data and perhaps a drive image so
that it can be restored if it all goes horribly wrong. FWIW for a
simple single partition drive such as WinXP probably has it's rare for
things to go badly - it's more convoluted partition schemes that Vista
introduced that cause the most headaches.

Well worth running CHKDSK /R on the drive first and also defragmenting
Windows.

I used it to shrink my Windows partition so that I could install Linux. The
only "issue" I ran into is that when I booted Windows, it noticed the hard
drive was "smaller" and it wanted to run chkdsk to ensure the integrity of
the file system. I let that run and Windows 7 now co-exists nicely with my
other Linux installations.

And I forgot to mention (like the other fine folks did) to run defrag on
your Windows partition BEFORE you resize it.

Yes, but if they didn't mention it, make sure to defragment

the XP before starting the install.

I also have not had a problem resizing partitions using gparted
or doing it in Ubuntu during the Live CD/DVD install.

That said, it is prudent to save all your data, especially the most important
data you don't want to loose.

You could do that by saving to a CD or multiple CDs or DVDs. If that isn't big
enough may be a 32GB flashdrive.

I have a older 68GB IDE drive that I backup my entire Ubuntu /home partition now
and then. The last backup, actually a copy to, takes up over 14GB.

You can have multiple copies or revs of Ubuntu on that HD and all can use the
same /home partition. Whatever is in that partition that you have access to, you
can have access to in any of the revs of Ubuntu because they all are looking at
the same data.

I have all my important stuff on 2 external HDs, so even if Windows crashes
it's safe.

I need to resize the partition from 500 gb to ~200 gb

Make sure you pick the correct HD to put it on.

At the bottom of the screen, when you are setting up the partitions, there is
also a place to pick the drive to place the boot tables, grub, on. (At least
this is the case for me. I have two HDs present and install on a HD that already
has Ubuntu installed. That may be different with your install.) Just a heads-up.
My two HDs are internal. One is almost only used as a backup.

Sounds like you are savvy enough to pull this off with no problems. For someone
that is not familiar with using Fdisk and Format on a HD installing Ubuntu could
be a real challenge.

Ubuntu allows you to re-size the existing Windows partition during the
installation so there's no need to do it manually before you start.
You get a nice graphical display where you can move a slider to decide
how much space to allocate to Ubuntu and how much to leave to Windows,
couldn't be easier but remember to leave Windows enough to play with
and also bear in mind that Ubuntu will take a chunk of its space for
the swap partition.

When I install I get to the Partition Manager with several options.

. Guided - Use entire Disk
. Guided - Use largest continuous space
. Manual

I don't think I want to use the first one and I get an error when trying to
run the 2nd saying the space is not large enough. I don't see any way to
resize partitions using the Manual option.

I booted to the Live CD and opened the Partition Editor, System > Admin >
Partition Mgr. I tried to Resize the main partition, but everything is
grayed out. Even if I change the size, the OK button is grayed out. The
Up-Down Arrows next to the size box don't work either.

The main partition is labeled like this:

/dev/sda1 NTFS 457.17 GiB boot (there's also a yellow triangle with an ! on
it.

/dev/sda2 Extended 8.59 GB

Sda5 Linux Swap 8.59 GB

I guess I tried installing Ubuntu before.

So where do I go from here?