What istallation option should I take?
Detailed recommendations are hard to give as you haven't told us enough about your system. In general terms you should:
1. Take menotu's advice and back up everything you don't want to lose. This is a safety measure. You probably won't lose anything, but if you do, you'll be pleased you have a backup. You may not have to back up Windows itself if you have a disk that you can reinstall it from.
2. Then decide how large you want your Linux partition to be and resize your Windows partition accordingly. luikki's link will tell you how to do it from within Windows.
(The consensus seems to be that you should do it from within Windows if you don't want Windows to protest later. I'm not really convinced that this is good advice as neither DiskDrake nor GParted -- run from Linux -- has ever trashed a partition for me. The Vista partitioner has. But I was probably just unlucky.)
3. Install PCLinuxOS the normal way from the live CD. Use the unallocated space you just freed from your Windows partition.