No need to install Windows on the PC it will run on. So the disk should be in this PC when installing. And if it will install (see below) you can format it during the install, or even install it in the empty space that it has (although that doesn't make much sense, because you will have to reinstall all your games and other programs anyway).
The only important things:
1. Old versions of XP won't install on SATA drives unless you feed them a diskette with the SATA driver or set the BIOS to have it emulate IDE
2. Old versions of XP won't support such a big hard disk.
But with an SP3 installation CD you shouldn't have problems, I think.
I recently had my harddrive crash in my pc, I have two in my box the one i had running windows xp is the one that died, the other one is a 149 gb sata hd I had games and other programs on. The question I have is can I take out the 149 Gb HD and use one of my other pc's to wipe the hard drive and put windows back on it to use for my game pc again?
The pc tht crashed was running windows xp 32 bit
3 gigs of ram
amd dual core 3.5 processor
9800 gt nvidia vid card