I personally always download files, programs etc. to my desktop which makes them easy to find. Then after installing a program or moving a file to a more permanent storage (like a new folder) I delete all the folders, program setup files etc. from my desktop.
If you're low on C: drive disk space and you have another "physical" Drive (D: I believe you said), you can change your location of the entire "My Documents" folder by:
1. Open Windows Explorer
2. Right-Click on your "My Documents" folder and click on "Properties".
3. Click on "Move" under the "Target" menu
4. Choose your new destination (i.e. D:\My Documents)
Another thing you could do is to re-partition your C:\ drive allocating more room if you have the physical space. If your C:\ drive is just an older small drive then it wouldn't work. If you do have more room but it's under a different drive allocation, you'll need something like Norton or PartionMagic to partion the drive.
NOTE! I see you are using Win XP so you might reference this link:
Hope this makes some sense to you.