So i tried to shrink my exteranl drive to and it resulted in:
1)my external hard drive going crazy
2)Me unplugging it from my computer
3)Blue Screen Of Death showing the error
4)2 reboots to get windows to boot right
So i want to know how long does it take to shrink a drive? Should my external make all of that noise?

Excellent, what more can I say. For noise depends on your external. A little bit of noise is good (shows it's not dead). To shrink a drive, it depends on how much space you are wanting to give as to how long it takes

Also, i have an XP computer. Is there a way to do this through XP sp3? I didn't see an option in disk management.

Actually Windows XP does have Disk Management, it just doesn't have the ability to shrink volumes.

I tried it two more times. Both resulting in a BSOD. Here is what happen:
1st time- Let it run for about 30 minutes. Nothing was happening except my mouse was doing the little cirlce icon to resemble that is was busy. I unplugged the harddrive and got the BSOD. Took 1 reboot to get back to main logon screens
2nd time- Let it run for 2 hours. Nothing happened, and i just had the same problem as above, where the mouse showed that it was busy. Unplugged it, got a BSOD and it took 2 reboots to get back to the logon screen.

It hasn't even done anything to my data on all the times that i unplugged it. It's like it's not doing anything. I also forgot to tell you that it was already shrinked once using vista. I shrank 59 GB out of a 300 GB drive. But that was when it didn't have anything (files) on it. Now i got full backups, email, like 100 movies. It's got only 70 GB of space left. I have recently done some services work. Could that have something to do with it?

EDIT: I deleted the 59 GB partion now so, there is 59 GB unalcolated space. I also defragmented it and will see how it goes soon. If my memory serves me correct, last time it only took like 5 minutes.