This is a very common task, so luckily the HDD makers give you free help to do it. It's part of how they induce people to buy their new big drives as an upgrade. What you are looking for is a software utility to do "cloning" - that is, make an absolutely perfect copy of EVERYTHING on your old drive to the new one. In addition the software helps you to ensure the new unit is bootable so it can take over the C: drive function, AND allows you to adjust for the huge increase in disk size.
Most major HDD makers will allow you to download from their website for FREE the software utility you need for this.There is one small trick you need to know. Their software is customized, and one result is that it makes the clone copy TO a drive only they made. They don't care whose old drive you are leaving behind, but they won't help you use a competitor's new drive. So, if you buy a drive from Seagate, go to their website and download their Disk Wizard package. If you buy from WD, theirs is Acronis True Image WD Edition. Both, actually, are versions of a third-party package called Acronis True Image and it is very good with LOTS of uses, so be sure you also get the full manual for it and read through to find the section on cloning to a larger new drive. In each case, I recommend you install the software to your current C: drive so it knows everything about your system before you use it.
Of course, if you buy from another HDD maker, they probably also have free software for this. Just check their website BEFORE you buy the HDD if possible.
There COULD be a small issue for you on disk size. The original Windows XP did not have a feature called "48-bit LBA" that is necessary for using any hard drive over 137 GB in size. But that WAS added in Service Pack 1 and maintained thereafter, so if your XP as installed already has any Service Pack installed, you are OK. BUT if you have NO Service Packs installed, you really MUST update your Win XP before proceeding. I would suggest in that case to go for the latest, SP3. Download and install to update. THEN download and install the cloning utility and continue.
Now, some issues to be familiar with. On any physical hard drive unit there is no information except the existence of tracks and sectors - no actual data. Before it can be used by any OS two steps must be done. The first is to Create one or more Partitions. These are just blocks of space on the HDD that will be treated as one "drive", each with its own letter name. You can make the entire HDD into one Partition (yes, you do that even if you only want the whole drive to be used as one chunk), or you can make the first one smaller and then establish more Partition(s) in the unused space afterward. The very first Partition you create will also establish at the very start of the disk a small data block called the Partition Table. Any OS at start-up will look on the HDD unit at this very particular location to find that table, and use the data in it to recognize which chunks of the real physical disk are used as which logical "disks". The second operation, done for EACH of the Partition(s) you make, is to Format that logical "disk", which includes installing on it a File System with its hidden tables to track disk sector use.
The cloning software will do all these things for you, but there are options for these you need to control. They involve size of Partition, whether it is bootable or not, the type of File System, and the details of the Format operation.
Oh, there is one more important detail for Win XP users. Windows XP in ALL its versions does not know how to use any disk unit beyond floppies and an IDE drive. To solve this problem for users with modern SATA drives, it always has had a procedure at the beginning of the Install process to allow installation of a SATA or AHCI driver as an integral part of Windows XP. But recent motherboard makers offered another alternative to make things simple. When a SATA HDD is installed and configured, right close to where you Enable its ports, you also set the Mode of the SATA port. One popular option was to set it to IDE (or PATA) Emulation. In this mode the mobo makes that actual SATA drive look like a plain old IDE drive to Windows, and it proceeds along merrily not knowing the truth. (You lose a few advanced features of SATA this way, but many don't care.) SO, check how your old drive is set up in BIOS Setup. IF it is a real IDE drive, or IF it is a SATA drive set to IDE Emulation mode, make sure you set the NEW drive to this same mode. However, if your old drive is a SATA unit in native SATA or AHCI mode, make the new drive's port mode setting match that.
So, let's assume you have updated your XP if necessary, then downloaded and installed your utility from the HDD company's website. Now you mount your new HDD in your machine mechanically and connect the power and data cables to it. Just to be safe, IF you have another hard drive in your machine, temporarily disconnect it. Boot up the machine and go immediately into BIOS Setup to set the SATA port for your new drive. Save and Exit from here to finish booting into Windows, then launch the cloning software. You will have to work your way through the menu system to set your options.
1. VERY IMPORTANT! Set the Source drive as your old one, and the DESTINATION drive to the new big one. Remember - everything on the DESTINATION drive will be wiped out, so don't set this wrong.
2. You will have it make a Primary Partition that is bootable.
3. By default it may offer to make this Partition the same size as your old drive, which I bet it NOT what you want. Manually change it to what you do want. That may be the full drive size, or it might be less if you plan to come back and create another Partition later.
4. Make sure it is set to clone completely everything.
5. For Formatting options, choose to Install the NTFS File System unless you really know you need a FAT32 system for a good reason.
6. A Quick Format will do all the disk preparation work necessary in about 10 to 15 minutes, then start on the cloning task. A Full format will do the Quick thing and then launch into an exhaustive test of every part of the drive. This will take many HOURS (last one I did took about 5 hours for a 1.5 TB unit) and is usually not necessary for a brand new drive, but if you have the time it is an extra security check. When that is finished it will do the cloning task.
When you have finished making your clone copy, exit the utility and shut down. My suggestion is to remove the old drive (well, at least disconnect both its power and data cables). Now, if you're replacing a SATA drive with another, I'd move the data connector so that the new one is plugged into the same mobo port that the old one had. If you're migrating from IDE to SATA this does not work that way. In that case you should boot directly into the BIOS Setup screens and check that the old drive's port (if you're not using it) is disabled. (The new drive's port I presume you must have Enabled earlier.) Then go to where you set the Boot Priority Sequence and make sure the old drive is not in there, and the new drive is, in the right place. Save and Exit, and you should boot into Win XP looking the same as always except that your C: drive will be a LOT bigger.
After you've run smoothly this way for a while, you can figure out what to use the old drive for. Until that time, it contains a perfect backup of your system up to the moment of making the clone.