Actually I didn't mean setting up a separate home partition, I simply meant creating a separate partition for your personal documents. That's a lot easier than setting up a home partition, because there's no configuration necessary.
Sounds like you have it exactly right if giving the unallocated space to sda1 is what you decide to do. You can omit the last step of selecting "swapon" if you want, as that's not important since I doubt you'll need the swap space when doing the partition changes from the Live CD. Good luck and let us know how it goes.
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