Remove/disconnect orginal HD, mount the new HD. Using the vendor s/w or other s/w make a 40gb and 120gb partitions. If you have ghost or some image s/w use it for later. Install the XP OS on the new HD plus the mtrbd. drivers(your CDs) on the new HD, but no data or working pgms., keep it fresh. Once done, shutdown system. Now mount old hd as 1st HD and the new HD as 2nd HD, either CS or master/slave setup. Make sure you have the image CD/floppy s/w, and boot to it. Using that s/w, image the orginal HD to the 1st partition of the new HD. Once completed, shutdown. Remove your old HD and mount new HD as master or CS setup. *NOTE* when installing the XP OS make sure the file system is the same as the old, FAT32 or NTSF and of course if NTSF that it works with the image s/w under that OS, as some older image s/w works in a DOS mode. If this makes sense, try it, if not then google for a more complete answer.
The partitions wil resolve XP OS storage limits up front. The data must be transfrred to the new 2nd partition as the working area. Transfer all your data and pgms(after new install) once everything settles down. Keep the windows OS and stubborn s/w that wants "C" partition as its home. Oh yeah, always back-up or safe guard any important before attempting the procedure.
good luck -----Willy