Well, you can free up some unpartitionned space in advance or of SuSE has a partition resizer you can do it at installation time. That's where the defrag comes into play, it'll move the data to the front of the disk to speed up the process. One catch is if your XP partition is NTFS I'm not certain SuSE has a tool that will allow NTFS resize. The co. I work for, Xandros, does have a 3rd party NTFS resizer available with the installer.
The suggestion of having a 2nd drive (even an old one only a few GB in size would do) is probably less of a headache if you're unfamiliar with partitioning. Nothing really complicated in screwing in place a drive and having the BIOS autodetect it.
The boot menu (LILO, GRUB or other) would present a choice based on either what gets detected or what you specify, giving you a selection and optionally a timeout.
Hope this helps...