Using an SSD as your OS drive is probably the best way to increase startup times, software launch speeds and just in general.
In order to replace your current HDD with an SSD, you would have to clone it using software such as Macrium Reflect (http://www.macrium.com/reflectfree.aspx) and then either change the order in which the drives boot up in the BIOS or by swapping SATA ports. This would mean you would not have to buy a new OS, and all the drivers etc. are copied across.
Unfortunately, you cannot transfer only the OS across, and because your current HDD capacity is much larger than the SSD, I assume you have more than 120GB stored on it. You would not be able to do a direct clone, and instead I would recommend transferring as many files to an external hard drive, as well as uninstalling games and software which can be reinstalled later to bring the size down. After you have cloned the drive and got it up and running, you can copy the files back.
At this point, you will have a spare 1TB HDD. You can leave this connected, and using Disk Management in Windows, reformat it so that it is a blank hard drive on which you can store anything else you like.
Hope this helps.
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