I don't think it matters which partition the game is installed on as long as windows can run it from there but I haven't tried that as of yet. I usually run GTA on the same partition as windows. I have gamestop digital download and I have a backed up copy with just LCPDFR on it, that i have on a separate partition, however I only have copied it to C: windows and played separate from my Gamestope DG download installed with no big issues.
Also you mentioned that you had installed LCPDFR and it "seemed" to be cool, does that mean that it worked before or that it hasn't?
and for GTAiv Diag, which program mentioned damaged, was it windows or a anti-virus? and what is you operating system?