Bogus Drive letters

First, from Administrative tools, computer managment, storage, disk manager,
Re-assign the drive letters for the CD and Zip drive. Make them extra high at this time.

Make sure that there are not lines in autoexec.bat that is assigning the drive letters to the CD and Zip drives.

Re-boot, and see if you can now re-assign the E: drive as C:

If not, boot from the CD, and run the recovery console.
You should be able to re-assign the boot drive as C: from there.

Chas

Changing the System/Boot Drive Letter
Make a full system backup of the computer and system state.
Log on as an Administrator.
Start Regedt32.exe.
Go to the following registry key:
HKEY_LOCAL_MACHINE\SYSTEM\MountedDevices

Click MountedDevices.
On the Security menu, click Permissions.
Check to make sure Administrators have full control. Change this back when you are finished with these steps.
Quit Regedt32.exe, and then start Regedit.exe.
Go to the following registry key:
HKEY_LOCAL_MACHINE\SYSTEM\MountedDevices

Find the drive letter you want to change to (new). Look for "\DosDevices\C:".
Right-click \DosDevices\C:, and then click Rename.

NOTE: You must use Regedit instead of Regedt32 to rename this registry key.
Rename it to an unused drive letter "\DosDevices\Z:". (This will free up drive letter C: to be used later.)
Find the drive letter you want changed. Look for "\DosDevices\D:".
Right-click \DosDevices\D:, and then click Rename.
Rename it to the appropriate (new) drive letter "\DosDevices\C:".
Click the value for \DosDevices\Z:, click Rename, and then name it back to "\DosDevices\D:".
Quit Regedit, and then start Regedt32.
Change the permissions back to the previous setting for Administrators (this should probably be Read Only).
Restart the computer.