If you image XP to your HD, you have no access to your files on it, just the ability to reimage it to a HD to boot the same OS you have now.
Here is some information about the bad pool header error which may be from trying to use your external to clone HD: http://www.wilderssecurity.com/showthread.php?t=204466
Since you mention the need to back up Outlook mail, you probably need to run the Windows 7 Upgrade Advisor as there is no Outlook mail in Windows 7, instead you have to download new Windows Mail from the internet: http://www.microsoft.com/windows/win...e-advisor.aspx
In this case you might want to consider Easy Transfer which others can advise you upon, as I have never had to transfer mail as such and am not even sure where it is stored in XP.
If you want to copy the files from XP, unplug the XP HD during Windows 7 install, then after installation plug back in XP to copy over your files. There may be some issues with file permissions which we can help you with if this doesn't help: Take Ownership Shortcut
Once you are sure you have your files copied over, we can help you clean and format the old XP HD as a data drive: Disk - Clean and Clean All with Diskpart Command Clean Install Windows 7