New guy needs help

I have a Dell D830 with a C: 80G HD, Windows 7 Home Premium, 32 bit, etc.
I am constantly close to being out of space without using external drives. While I have no real problem with this, it is sometimes a PITA.
AND, I got a 1T ext drive, loaded all things D830 on it, including system backup stuff and even though brand new, it stopped working after 10 days and all is lost.
All that being said, I would like to put a new drive in this thing. I ordered a medium price 320G unit.
I have tried to understand what it is I need to do to install that drive and I'm still not certain I can, or should do this myself.
I bought the D830 used and it came with the 7 installed (bottom case info indicates original install was Vista) and I do not have installation disks.
I have once again backed personal stuff up to another ext HD.
Tried loading system image to yet another ext HD but it is apparently not formatted in NTFS. Or whatever.
And I cannot use DVD's (the other option shown) because for some reason the D830 isn't reading those (they show up on the ASUS laptop we have).
So, is changing the HD something I should NOT do myself?
If I can do it, can someone please give me simple, in English, instructions on what I need to do, should do, etc.?
Do I need to somehow format the new drive? Can I just plug it into a USB port (I do have a HD reader) and transfer all needed info to it and then just pop it into the HD slot?
Do I need to create system image? Will it allow me to reinstall if I can't do the USB transfer thing?
Can I create the system image to a USB flash drive, install the new HD, then recreate drivers, files, etc.?
Help.....!
Thank you.

Well crap...I already have a HDD on the way. I can probably return it. I'll check into that.

I also already downloaded Macrium but haven't really learned how to use it yet.

I'm not sure why the DVD drive doesn't work since the same drive does CD's just fine. Well, it plays them. Haven't checked about burning. I'll do that too.

Is there any real benefit to moving up to 64 bit and a different version of Windows 7, i.e., PRO? Or just stay with the 32 bit and/or Home Premium?

This same laptop screen started losing pixels down in one corner for some reason. So I got a new screen, installed it yesterday and LO..it works! So confidence level has a jump start.

Thanks for the help and advice. I should have found this site first.

If you plan to keep less than 3gb RAM I'd use 32 bit, but if you plan to have more than 4gb RAM then I'd use 64 bit. You can use either bit-version with each license.

Macrium makes it easy to install or use the boot disk to drag the old OS partition to the new drive, then a link appears beneath the new OS partition to adjust its size if needed. All of the settings are handled automatically. Just unplug the source drive and boot the new drive.

An SSD is the best upgrade you can have for Win7, even faster than getting a new higher-end PC without one.

There is no advantage to buying a higher version unless you specifically need an extra feature. The higher versions are the same exact OS as Home Premium with just a few extra expensive features unlocked. Compare Windows 7 Editions - Windows 7 Forums

OK.
Working on DVD drive. Tried the filter registry thing but no filters show up. I did have to remove the filters for the CD as it stopped working not long ago too. Same registry?
Properties for the drive tell me DVD drivers etc are working properly. I hear noise and disk tries to load but nothing happens. Same disk loads just fine in the other laptop.
Sorry to be such an immediate PITB but all this just started happening. Laptop has not been dropped or otherwise abused. Just started freaking out.
I have ordered the Windows 7 32 bit SP 1 pkg. It's on the way. But apparently I have to get the CD/DVD fixed before I can do much of anything else right?

DVD drive does Play pre recorded DVD. Just won't load or recognize blank.

You can install using flash stick as discussed in Step 1 of Clean Reinstall Windows 7.
Note that if you have UEFI BIOS it requires a special tool and booting stick/disk as UEFI device, delete all partitions to reset formatting to GPT.

BIOS is A17.

Please post back a screenshot of Disk Management - Post a Screen Capture Image

Do you want to reinstall? Have the WIn7 Disk? Have a flash stick to format for install?

Geez..if this works you've already expanded my knowledge. Probably boring as H**l for you but kinda cool for me.