A fresh install of Windows 7 on the smaller drive with all your programs/apps would be ideal IMO.
Then, move your Documents,Videos,Pictures,Music User folders to the second drive.
I would also make a Folder "GAMES" on a secondary and install all games to there as well.
I would also advise either a 3rd HD for Backups, OR a hidden partition on the DATA drive (or one without a drive letter) that your Imaging Program can use.
I would make 1 image as soon as you install and activate Windows for safe keeping. Youll even be able to burn that Image to disc in the event you want to start fresh in the future, and Windows 7 will already be activated. And then periodic Imagages thereafter once you install most of your Apps etc.
There are several good imaging programs. Acronis, which offers many more futures but you'll need to purchase is excellent. Theres also a few really good free alternatives as well. Paragon, and as mentioned, Macrium Reflect.
This isn't saying Imaging your current drive over to the new HD isnt possible. Using Macrium to image and restore as mentioned is a viable option.
Acronis also has a 30day trial that will be able to clone the drive as well. If you purchased a WD drive, dont forget theres a free version of Acronis to clone the drive available to you from the official website. You just need to register you drive/serial number to gain access.