Hello @FaintGem6752777,
I would install to the drive you have the most free space on.
When you activate your code from the DVD, it turns it into a digital license tied to your MS/Xbox account.
If you ever reinstall, MSFS will be found in the MS Store app (or Xbox app) - you shouldn’t need the DVD for this as long as your MS Store/Xbox app is signed into your account.
However, I do believe you still need disc 1 in the drive to play MSFS - but I’m not sure if that has changed. Maybe others who have the DVD version would know.