Clone XP to other HD, or Create an Image backup of XP to your external drive then reimage to the target IDE drive. Recommend either Macrium Reflect
or Paragon Image and Backup 10
free editions. You will then have an XP backup image stored on your external in addition to Windows 7 files you back up.
Unplug old XP drive and test new XP HD to see if it will start. If not, you may need to run a Repair Install from booted XP CD.
Now you have two choices for dual booting: Preferred would be to unplug XP drive during Windows 7 install so both drives remain independent and boot via BIOS HD boot order, or the shortcut key given on first bootup screen for Boot Menu.
If you want the Windows-managed Dual Boot, keep XP plugged in during Windows 7 install and it will configure a dual boot menu. The drives are then interdependent and harder to extricate.
When installing Windows 7, boot from DVD, select Custom install, use Drive Options to delete all on HD, create new partition(s) as you wish, then format before installing Windows 7 to first partition.