Yes, you can set it as a slave. You also could put it on the other IDE channel (other cable) as a master or slave.
The current installation of XP on the old HD is expecting the old motherboard and its BIOS. That causes major problems. Boot to the XP CD and perform a repair installation of windows.
Hopefully you have a backup of your important files in cast there is a problem with the repair installation.
I wanted to upgrade my WinXP home-built system with a new mobo and cpu. But when it tries to start, it almost gets to the WinXP screen and then it restarts. It keeps doing this over and over until I shut it down. Someone told me that you can't use the same hard drive that was used in a WinXP system. But all of the hardware except mobo and cpu are the same. (sometimes I almost miss Win98)I have all of my software and documents there and I hate to wipe it and start over from scratch. Can I set it as a slave in my upgraded system, or will this not work either? The new mobo and cpu are just sitting in the box. I had them checked out at a computer shop to make sure they were ok and they checked out fine. I appreciate any help.