Questions about buying a new hard drive to replace a failing one

Ok so I have a question regarding a failing hard drive and what I can do with it as I am considering several possibilities.
First off I have a Gateway DX4831-01e and i've had it for about 4 years now it has been a very reliable computer I have never had any problems with it but recently the hard drive started making noise. I know I need a new one and soon but I have a few different questions or thoughts on what to do with it. The hard drive is 1 TB by the way, and it is running Windows 7:

1. Would it be cheaper in the long run to just get a new computer? I also want a bigger hard drive, probably at least 2 TB.
2. I know that I need to back-up my current drive but the more i think about it I don't want to put everything on my current computer on the new hard drive. I kind of want to pick and choose the documents, movies, music, and pictures that I currently and make it more organized than I currently have it.
Is there any way to install the new hard drive with the old one still in it and then just transferring the files I want over to the new one? Or something along those lines. I thought about getting an external HD and just backing up my files that way but I don't want to spend the money on both an external HD and a new HD. Also which type of hard drive would be best?
3. I was also thinking of upgrading to Windows 8. Thoughts on if it is worth it or not?

Sorry if it's alot of questions I just haven't found any information that shows me how to do what I want to do. Thanks!
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More about questions buying hard drive replace failing
  1. It is not worth downgrading your computer to Windows 8 particularly now when the Microsoft price offer has expired, the money would be better spent on getting a SSD drive.

    Go for a 120 Gig SSD if you can afford it, your computer will love you for it. If not get a 2 TB drive. Don't get a bigger drive than this as you will not be able to boot from it if you do not have a UEFI BIOS. Make sure the BIOS is set to AHCI if installing a SSD.

    You can have both the new and old drive in your computer at the same time and copy your existing instillation to the new drive. But it would be probably better to do a clean install and get a fresh system. Having two drives in the computer at the same time is the best way of transfering your data to a new drive.
  2. If your existing drive is making noises as you say, immediately clone the drive on to a new drive. If not, you will lose the OS and your files.

    The replace the cloned drive in place of the old failing drive and you are back in business.
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