I got this game to install (finally) but when I start played the original Bard's Tale, the game asks where to save my characters at. My options are Slot 5, Drive 1 or 2, or Slot 6, Drive 1 or 2. I am running this game on my PC, using Window's XP. Can someone explain what is being talked about with where to save my characters...?

The game is running under an Apple IIgs emulator, and therefore the game is referring to the expansion slots used by the original Apple IIgs.

Slot 5 was used by 3.5 inch floppy drives (the firm ones) and is probably what you want. I believe the game won't let you save to the boot disk and will throw an error if you choose the wrong one. My guess would be to choose Slot 5 Drive 2.

Slot 6 was used by 5.25 inch floppy drives (the disks that were actually floppy), which didn't store as much data and were made available for backward compatability with older Apple II software (like Bard's Tale 3, which didn't have a released IIgs version).

I am a bit confused... if both choices refer to floppy drives, how can I save my game on them?

They refer to virtual floppy drives which are actually stored as disk images on your computer. When the game tries to read or write to a floppy, the emulator reads or writes to the disk image instead and makes it look like a floppy disk to the game.

Yes, that is what I am saying. The saving choice matters in the sense that you will very quickly get an error if you choose the wrong one.