You will need a Windows XP SP1 or higher CD; the original XP does not support drives larger than 128GiB/137GB.
You can slipstream you existing XP cd with a service pack so it is integrated; or just install the service pack and then expand your current C: drive to use the additional space. This can be done in the Start->right click My Computer->Manage->Disk Management screen and should be done after having installed SP1 or higher and rebooted.
Some manufacters have a BIOS update, that would then support larger hard drives.
You did not partition is as such, right? Just lost 123GB?
You have some choices:
1. Leave it as it is. Loose all the extra space.
2. Some hard drive manufactures have a "patch" (i.e. Western Digital Smart Drive) to overcome this limit. I used this on my old 486DX machine in the 90's that would only support up to 2.1GB, and I had a 2.5GB drive. It just partioned the drive into 2150MB and 400MB. (This is a software fix, for a hardware problem.)
3. Get a new motherboard, to support large hard drives, and your current CPU. ($$)
4. Get an add-on drive controller card to support larger hard drives. I think these can overcome the motherboard onboard controller limit. (Research it, via online retailers.)
4. My suggestion: Get a 120GB hard drive, for now. ($$).