(2) Install Ubuntu to a new partition along with existing partitions, which will not erase anything, but may not do exactly what you want. I believe it will (perhaps only sometimes) resize an existing partition to make room for Ubuntu.

(3) "Something else", which is the manual method, and is the one I always use. But it requires slight knowledge of the current setup, which you probably have since you have multiple partitions.

I suggest using option 3, but if you are not sure along the way, you should stop the installation, unless you have a good backup. But it's not too hard, especially if you prepare yourself first with a little information... such as:

Boot the Ubuntu Live CD, but choose the option to try it out without installing yet.

Once it's running, run the program "gparted" from the menu. This is a very nice GUI partitioning programming, which is good for visually seeing the partitions and data.

It will probably be showing the CD layout by default, so you'll have to change the combobox at the top to show your hard drive, which should be named "sda". The partitions are numbered as sda1, sda2, sda3, etc. The order is the order they are created, and it's not necessarily consecutive. Anyway, you should identify the XP partition and remember it so you can reuse it for Ubuntu.

You will need a small swap partition of 3 or 4 GB. If you have extra space on any partitions, you could resize one and create it now. It doesn't matter where it is.

When you've identified the partition for Ubuntu (most likely sda1 if you are over-writing XP), you can choose the option to install Ubuntu onto sda1. Probably best to choose ext4, and format the partition.

I've left out a bit of detail, as I'm not sure how much you need. Feel free to ask any questions if you're unsure of anything, and if you feel uncomfortable along the way, just don't continue, and no harm will be done. Also, you should be able to use the install CD to run a browser (you can verify this before installing), so if something goes wrong, you can at least still research or ask questions.

Hope this helps.