Why not use the built in bars?  XP allows you to have multiple launch bars.  While I am using Vista 64, it is basically the same for launch bars.  I have one for my most used applications, then I have one for my dev utilities and then one for misc apps and finally one for my frequently used folders.  Although, the one for the folders is now losing its appeal since Vista has a built in favorite links pane in the file explorer.

For example, on my systems, the first thing I do is change my start bar to be auto-hide and cram it to the left side of the screen and expand its width to about 1/4 the screen width.  Next, i add the toolbars and select small icons display without text.

For my application toolbars, I expand them just large enough that I can see all the icons in the group.  For others, such as favorite locations I shrink them up to that only the title for that bar is shown which forces the folders into a popup menu.

For my utilities toolbar that has tons of differnt files, I use nested folders to group them.  When I shrink that toolbar, it shows it as a popup menu with the nested folders as submenus.

It works well, I only have to move my mouse to the far left side of the monitor to launch just about any program I use or to open folders I frequently use, and it is out of the way when I do not need it.