You’ll definitely want as much space as possible. UE4, along with your project folders, will take up a lot of space. That said, you’ll often hear people say that you should install stuff onto your C-drive to prevent any weird bugs.
I had my UE4 loaded on my D-drive for awhile and didn’t run into any weird bugs, per-se. However, my D-drive was pretty slow, and I had really long load times and compile times (C++ compile times, specifically). I ended up getting an SSD just for UE4 and my projects, and that seemed to fix the issue.
As for downloading and installing 4.26: it’s up to you! I’d recommend waiting until the full release (right now it’s still in preview/beta stages). The latest release of an engine is always going to come with new problems and bugs. Older versions are usually more stable. But if you think you’d rather just start clean with 4.26 and not have to download it again later, you can do that too!