In most cases, the easiest way to keep discrete libraries for syncing both iPods is to create a separate user account for each person who uses an iPod with the computer.
First, click Start > Control Panel > User Accounts (Start > Settings > Control Panel if you use the Classic view). Click 'Create a new account' and follow the instructions.
Windows XP kindly provides a shared folder that already includes a directory called Shared Music (find it under C:\Documents and Settings\All Users\Documents). The easiest thing to do is to copy all the music on your computer into this folder so that all users can access it. Then the lucky owner of the new iPod can pick and choose what music to include in his or her iTunes Library.
From the new account, in iTunes, click File > Add Folder To Library, and copy over whatever music you want (make sure to check the box next to 'Copy files to iTunes music folder' when adding to library, under Advanced in the Preferences dialogue box, so that iTunes doesn't consolidate the files for the music library).
Now both users can share all or part of the same library, add new music whenever necessary and automatically update their iPods without the hassle of manually sifting through a large shared library.
