Your partition is accessible so it should not be a problem if you install the product in the other partition e.g. drive D
It cannot only be installed on any type of storage media that may be inaccessible at times e.g. network drives, removable drives, hot-swappable drives and USB and FireWire (IEEE 1394) drives that may be disconnected.
If your drive C (where Windows is installed) do not have enough space.. why not resize Drive C? There are tools to manage the partition without the need to reformat. Backup first before proceeding to make sure you can go back if problem occur.
I have a Sony Vaio with a 160 Gb hard drive that is formatted in to 2 drives. My C drive is the smaller of the two and I am running out of space on it. Rather than reformatting it to make the C drive larger, I want to remove my current Norton SystemWorks and Norton Internet Security from the C drive and load the 2008 versions of this software to my D drive. Symantec told me I can do this but there only explanation as why I shouldn't is because Windows is on my C drive. I am hoping that someone can give me a better explanation since these programs seem to scan and protect both hard drives.