You can do everything you just said. XP before the first service pack had problems with large drives, after SP1, no worries.
Your system uses an IDE drive.
You can download a drive mirroring program like Acronis True Image (use the free trial version, you only need it for about an hour to do the swap) Most retail drive Kits come with mirroring software anyway. So you don't need to worry about Acronis if you buy a new kit, if you only buy the bare drive, you will need to get the software. You can also download mirroring software from the drive makers website if you prefer.
Install the new drive along with the old drive, install it as the slave drive by setting the jumper. Boot up Windows, and make sure the drive is set to active under Disk Management. Use Acronis (or whatever mirroring software you are using) to mirror your 80 gig drive to the new one.
Yes, you can mirror everything on your 80 gig drive to say a 500 gig drive.
Shut down, change the 80 gig drive to slave, the new drive to master, reboot...tada!
well k you can consider this option if you want......buy a sata hard disk itself because you can get a larger storage space like a 250 gb or higher for your system at a cheaper rate than ide hard disk ... and get a SATA to IDE converter with a good speed upto max 600mbps and you can use a SATA hard disk for storage....