Installing Windows on external hard drive

OK, right now, I have a 250 GB HDD hard drive previously present in my CPU. Its partitioned into three disks:
Local Disk(C  - 97.6 GB Local Disk(D  - 67.6 GB Local Disk(E  - 67.6 GB
Now, the problem is that my hard drive is full. I am going to buy a 1TB external hard drive for my cpu in two weeks. I am thinking of partitioning it into four disks ( 250 GB each ).
I am also thinking of merging my Local Disks C, D and E on my older hard disk into one 250 GB hard drive. I am planning to entirely format my previous hard drive and do a fresh install of windows.
So please help me with:

1. Partitioning 1 TB external hard drive into four 250 GB hard disks.

2. Merging C, D and E on my previous hard drive into one 250 GB hard disk. I currently have original Windows XP Professional installed in Local Disk (D .

3. Advice on where to install fresh windows and how