Need help on transferring datra from old hard drive to new hard drive

I have a Dell Dimension 2400, and according to the Dell Disk Monitoring System, the drive 0 on the primary IDE channel is operating outside of normal specifications, and it advises me to back up my data and get a new hard drive. I currently have a Maxtor DiamondMax plus 8 (6E040L0) which is the failing one.

I plan on getting a Hitachi Deskstar P7K500 250GB IDE Hard Drive. However I don't really know how to transfer all my data and my system files including my Windows Xp system files to the new hard drive. I've burnt my whole hard drive on to DVD's (about 24Gb --> 6 DVD's). However I've also heard of disk imaging, although I don't really know much.

If I install my new hard drive, and turn the computer on, how far will the computer boot?, since there is no system and OS files on the new hard drive. Will the opening Dell page load, and will I be able to get into setup?

And if the computer won't boot far enough for me to get into the user accounts, how do I transfer my DVD data and system files to the new hard drive?

Then there's disk imaging. If i create a disk image of my entire hard drive, where do I store it, and will it be as big as all my files i.e. 24gb, and is the only way of storing it on a external hard drive?

Finally I was wondering how am I supposed to restore the files in my disk image if my computer won't boot far enough for me to actually do anything.

I'm sooooo sorry that I've asked a zillion questions, but I really have to know before I make the purchase.

THANKS GUYS!!!!!!!

well you can back up the hdd to a new one by connecting the new one with an usb to ide adapter. i always use norton ghost because its so easy and it compresses the single backup file a lot(for me from 19 to 5-6 gb) after you have the backup file, use the cd to boot up and restore from there