It depends on if you want to start fresh with a new hard drive or transfer all the bloat. It also depends on what you plan to do with all the hard drives.
If you want two hard drives (a 40Gb and 120Gb) then whale is dead on just replace your CD-ROM with the new hard drive; transfer all the stuff from the non-bootable 40Gb and then put it all back together with your brand new 120Gb replacing the now defunct 40Gb. Transferring is easy; you'll see your new drive along with the other and you can copy the info over.
If you're looking to put it all on the 120Gb, you've still got some questions to answer.
If you're looking to start fresh with a new install. Replace the bootable drive with your 120Gb drive (make sure you set the jumpers right) and then install XP. Before you boot, replace the CD-ROM with the bootable 40Gb. Again, all the drives should show up and you can copy what you need to.
If you're just looking to drop the whole mess onto the 120Gb, bloat and all, then I would suggest using Norton Ghost. I've used it a few times and I've had no problems.
I just prefer to do it without the software. It appeases my sense of self-accomplishment and a fresh install is like putting on a new pair of pants...........
