Looking at Linux! - i have some questions

Ok I've read a fair bit about linux and I've got quite interested!

I have some questions:

1. I'm running windows xp on my pc, and I have a seperate external hard drive that I wish to install linux on. Once I've installed this I would like to start up windows, and then run Linux on top of this (within a window or something). Is this possible?

2. What is the best variation of linux? (i'm quite confused but it seems people have made different versions of it)

3. What are the essential applications for linux? - any good ones, i.e. video editing?

Hopefully some of you guys run linux on tf; so I'm interested to see what you say!

cheers, Stillt