(1) As sminlal first said - Disconnect all other HDDs before Windows Install.
(2) You can do a clean install using the Upgrade Win 7 Version BY SELECTING CUSTUM INSTALL. Just a couple of simple steps - Will locate and post.
(3) I would recommend partitioning the drive. C drive for operating system and Programs, Not too large, maybe 120 -> 200 Gigs. Then the remainder of the drive as D Drive for all of your documments and files.
This way you can use win 7 Backup to image JUST your operating system and programs - Works great for reinstalling. Then back up your data as need. My self I use three partitions. D for most of my documents, speadsheets and misc and then E drive for all my Photos/dvd movie files.
Added:
When done with win 7 install, Reconnect your old HDDs and transfer all your data/files to the d drive. Also remember Win 7 does not have a email client - need to dertermine weather to use Windows live and/or a 3rd party email program.
Until your satisfied with win 7, you should be able to dual boot win 7 and XP. On my system I hit F12 during post and it brings up a choice of which drive to boot from (This does not change boot order in Bios). Just remember that what drive you boot to will be your "C" drive.
2nd edit, Added. Steps for doing a custum install using an upgrad disk
From one of my previous posts.
Do a Clean Install, select custom method, But DO NOT enter your Key
Go ahead and let windows 7 down load critical updates. Then:
Open regedit.exe with Start Menu Search and navigate to:
HKEY_LOCAL_MACHINE/Software/Microsoft/Windows/CurrentVersion/Setup/OOBE
Easier - Just do a search for " MediaBootInstall"
Change MediaBootInstall from "1" to "0". (Double-click it and then enter 0 in the dialog that appears.)
Close RegEdit.
Open the Start Menu again and type cmd in Start Menu search to display a shortcut to the Command Line utility. Right-click this shortcut and choose "Run as administrator." Handle the UAC prompt.
In the command line window, type: slmgr -rearm
Then tap ENTER and wait for the "Command completed successfully" dialog.
Then, close the command line window and reboot. When Windows 7 reboots, run the Activate Windows utility, type in your product key and activate windows.