No problem using a separate harddrive for Linux. I have one machine with 2 drives – one XP and one Ubuntu & Sabayon. My other machines have been single drives, partitioned between windoze and Ubuntu.

The dangers in installing are essentially the same, either way. Make sure you know what you are doing and either option is fine. No noticeable difference on the running end of things.

If you DO NOT have a spare partition for your Linux you can have another hard disk (HD) then install Linux in that HD, then use LVM (Logical Volume Manager) during your Linux partition set-up in order for your Windows HD to be included or be as one drive with your Linux HD. Therefore during boot-up, Windows and Linux can be selected from a menu for you to choose from.

You could partition your original harddrive and put linux onto that. Then you could get Norton Partition Magic.
Otherwise, just install linux onto the spare harddrive and when you want to run Windows, do not have the spare harddrive plugged in on startup. To linux, plug in the spare harddrive on startup.

No pitfalls at all, really. Both operating systems will be completely separate. You can run the bootloader from the Linux drive to start Windows or Linux, and the Windows drive won’t even be touched. The Linux install process will do all this for you.