What mount point should I use for data/free space

First, you need to understand Linux/Unix mount points a bit better. I wrote this article on the topic a while back, so you might consult it for background information. I'm sure there are other tutorials on this topic you might consult, but I don't have any other URLs handy.

Once you've got a better understanding of mount points, you should realize that your disk sizes are a bit awkward. A complete Ubuntu installation takes about 5-8GiB, although it's common to create a root (/) filesystem in the 10-30GiB range to give some space for growth and temporary files, plus a separate /home partition (as thom suggested) for your user files. (/home is not used in a default Ubuntu installation, but IMHO it should be.) A separate swap partition as large as your RAM or a bit larger is also common. If you add up the needs of root (/) and swap, it's almost certain to be well under half the size of your smaller disk. If you mount your 320GB drive at /home, that means you'll have either a ridiculously oversized root (/) or you'll have unused space on the 160GB disk and no convenient place to mount it.

Some people deal with this issue by using some of the storage space as a partition that will be auto-mounted somewhere under /media by Ubuntu. This is awkward, though, since your user files normally reside in /home, so you'll have to decide what goes where, and if you make bad decisions, you'll run out of space and have to spend time juggling files around to deal with it.

A more sophisticated way to handle the problem is to use Logical Volume Management (LVM), which enables you to group together several partitions (physical volumes in LVM-speak) into a volume group, which you can then carve up into logical volumes that can be any size -- even larger than any given physical volume. Using LVM will therefore enable you to set up a /home partition that spans both your disks -- perhaps 400-450GB in size. The trouble with LVM is that Ubuntu's desktop editions provide poor support for it, so you'll need to jump through extra hoops to use it. (FWIW, Fedora provides much better out-of-box LVM support than Ubuntu.)

I recommend you read a bit about LVM (at the link in the previous paragraph) before making any decision. You might decide that it's more hassle than it's worth, and just deal with your awkwardly-sized disks in some other way; or you might decide to take the plunge and set up an LVM for your computer. The point is to make an informed decision.

Your root (/) partition for the 160 GB is okay, leave the free space "as is" for the time being. In your case I would partition the 320 GB drive as ext4 and with mountpoint /home Trust me, it will make your life easier.

Other partitions can be done after the install. They don't matter much at this point

Good luck :-)

OK, my method may seem unconventional to some, but I've tried a lot of methods, and this one has really worked out well for me.

I create a big partition for documents, pictures, music, etc. For my own historical reasons, I labelled this partition "shared" (because it gets shared with any other OS I might install. I mount this at /mnt/shared, and change the owner to myself (chown me:me /mnt/shared).

In this partition, I create directories such as "Documents", "Pictures", "Downloads", "Music", etc. Once this is mounted correctly, I then make symbolic links of the well-known directories seen in "Places" in my home directory, and I delete each of the the still-empty directories in $HOME and immediately replace them with the symbolic links, named exactly the same as the original directories. Doing this immediately allows them to obtain the special icons automatically. If not done right away, they need to be set by editing the file ~/.config/user-dirs.dirs, which isn't very hard, but it's an extra step.

Once this is done, they appear to be exactly like the original directories, and work the same. But, they could be used for a different OS in the same way, even Windows, if needed.

I think this is much easier than setting up a separate $HOME mount, as you can't easily reuse the home directory for a new or different distro. I've had many problems in the past trying to reuse my home directory; this is much easier, as it isolates almost all the files you want to save.

Edit for more elaboration as requested in comments

I often like to try new distros, sometimes even off a live media. In order to evaluate a system, it's nice to have your documents and other media files in order to actually use the system to do your normal work. But you don't really want it to write a lot of files into your home directory, since you may decide to abandon it. So I let it create a new home directory in a new partition, and mount the big media files that are separate, where you might even want to save files that you use on the new system.

Also, when I install a new or different distro, I like to use the same username and password, so I don't want my working home directory to get screwed up by a possibly temporary system. But I'd do it even if I used a new username just to keep things tidy.

The "Places" I mentioned is shown in Nautilus, on the left where it shows "Places", "Devices", "Bookmarks", and "Network". I don't know if it's called "Places" for other file browsers or flavors. Also, in the home directory, those folders have a special icon.