How much space should I reserve for my Time Machine backups?

"Of course it'll be best if you can get a big hard disk to use Time Machine effectively - however from your question, I am assuming that you have your reasons to not be able to get it.

In this case, I would recommend you to NOT use Time Machine, and manually backup. There are a couple of reasons for this :

You can selectively choose to backup only the most important data
The hard disk can be a single partition, and space can be effectively used.

If you have to use Time Machine no matter what, then I recommend you do this (if I read your question correctly):

Set aside 30GB for that Windows-use partition - That way you can use FAT32, and both Windows and Mac can write to it. It need not be large because I am assuming you are using it to transfer data from your Windows machine to Mac.
Dedicate the rest for Time Machine.

And please, have another TM backup disk once you are able to do so."

"For any backup solution the bigger the better. You can purchase 1 TB external drives with Firewire & USB for $125 - 150... And while that can be considered expensive, consider what the purchase price was 1 or two years ago.

As a guideline:

Firewire 800 if possible, the speed difference is amazing!
Snow Leopard is almost a must. Once again there is a large speed difference between Snow Leopard and Leopard
Consider your exclusions carefully. For example, my default exclusions are here - Time Machine Information
A 320 Gb drive is asking for issues, since it's the same size. If your going to do that Time Machine won't be able to backup in depth.

Backing up in depth is quite important, simply because you have to ask yourself when did this file get deleted, or damaged? A week ago? Two days? Two hours? Two months? If your backup doesn't extend more than a day or two, you might as well not be backing up. A week? Or two weeks? Certainly, but what if the file was damaged a month ago?

A reasonable backup should give you at least 90 days of backup, why? For the backup in depth, but because with most backup systems, it gets too expensive to build the storage pool further... Tapes are typically around $30-75 (or higher) for around 60 Gb (compressed).

With TimeMachine, it's expensive, but typically not that expensive to go further...My Timemachine backup at work goes back to May... It's almost 3/4ths full... But it's available as I need it, and I'm storing other data on the drive as well...

For example, feel free to place content you don't want backed up on your time machine drive..."