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OK -- a bit weird, but I'm glad that the 2nd time things worked a bit better. Strange.
To choose a startup drive at boot, you need to hold down Option. But, that's not strictly necessary: you can choose a startup disk in System Preferences' "Startup Disk" preference pane.
If you want to make use of part of your 60GB drive for storage, I'd definitely recommend partitioning it into a "backup" partition (20GB, given your internal drive size) and then leaving 40GB for your own data. That way, you can smart update things and be assured that your data is isolated on its own volume.
Hope that helps!
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--Dave Nanian
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