You have to do a clean install since you are coming from XP.
That means you will have to reinstall all programs anyway.
Therefore, you could:
Install new hard drive
Make a C partition of appropriate size, say 60 gigs
Make a D partition of the remainder
Backup data from old hard drive to D, including email and bookmarks.
Shut down and disconnect old drive.
Install Windows 7 to C.
Reconnect old hard drive
If you want only 1 partition on the new hard drive, copy data back to C from either D or old hard drive. If you want 2 partitions on new hard drive, leave as is.
Format old hard drive as required.