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#21
You need a bootable installer (either DVD, USB flash stick or external HD) to do the type of install you describe.
Easiest is to borrow or buy a 4gb USB stick, install Ultra ISO trial version, on File tab Open ISO or DVD, on Bootable tab Write Disk Image, Format, Write to stick. Boot under USB or HD's.
Unplug the smaller HD to boot installer and install to the 500gb to Clean Install Windows 7: use Custom Install>Drive Options to Delete all partitions, create New, then Format. Accept the 100mb System Reserved partition which places the Repair console conveniently on the F8 Advanced Boot Options.
To move the 500gb HD to new hardware, SysPrep it on the old hardware before moving it to remove all drivers, activation and Hardware ID's - so you need the bootable installer anyway to make this work: SysPrep to move HD to another computer
Yes, you could clone or image your Win7 (if the same version) over to the 500gb, then unplug source HD and SysPrep.