Adding a hard drive alongside the existing one would mean you could use the second one for backups. Many people choose to buy "external" USB hard drives for this purpose but internal ones are more reliable and less troublesome (just ask anyone who has used external hard drives on a regular basis).
Before upgrading from XP to Windows 7 you need to check the HP website for your country. If they don't support Windows 7 on your model (no drivers) then you cannot upgrade because most of the hardware would not have any driver support and therefore would not work.
If your PC full model name is "HP Pavilion Media Center TV m7367c", I have just checked and they do indeed support Windows 7 on that model. The driver page is here: http://h10025.www1.hp.com/ewfrf/wc/softwareCategory?product=1831238&lc=en&cc=us&dlc=