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There's no particular "better" way really. As long as you've got space for them then you shouldn't have any problems. I would suggest putting a "virgin" copy in the default directory that it would normally create when you install the game, and then perhaps putting a version that you're intending to modify either on a second hard drive/partition or give it a path name. Generally you want to make it easy for you to know which version you're loading/playing with/modifying.