Hmm, the boot.ini file may be causing a problem depending on how it's set up I suppose. Both drives have their own boot.ini. Taking out one drive, won't change the boot.ini file of the 160GB drive. And that boot.ini file knows that it is Y: . But I suppose there could be problems caused some where along the way. So on your jumper, are you running cable select, master (single drive), or master w/ slave present? Try the following.
Boot to your XP CD w/ only the 160GB drive installed. Choose to repair an installation (press R), then the repair console will come up. Log in if you have to. Then type "bootcfg /rebuild." It should either detect your new installation, or have you go through and choose some options. It should be obvious enough as to which choice you should choose. Then you will reboot, and HOPEFULLY everything will work. You might just want to jump to this option first, if you feel the erge to do so.
Or before trying the above mentioned method, you could try the following... but I dunno how good the chances of success are. Whichever method you want to try, go for it. I'll try and think of what else could be causing the trouble.
In your 160GB drive's XP install, maybe try renaming your C: drive to D:. Then rename your Y: to C: . Then reboot and see if you can boot to the 160GB drive. I'm assuming the reason it wouldn't let you change drive letters before was either you were trying to rename it C: when there was already a C:, or you weren't logged in as the administrator.
If it still doesn't work: W/ the 160GB drive as master, try changing the boot order in your BIOS to HDD-0, then HDD-1, then HDD-2, just to make sure it's not missing anything.