All of the previous post are correct but I have done the very same thing with one of my boxes. I'll explain how I did it.
1) Set jumpers on both drives to "cable select".
2) Install XP drive on master connector of ribbon and ME drive on slave connector.
XP should be your C:\ drive...
I had to do a repair install of Win XP Pro. All my settings were saved but not sure about my Windows updates. I go to add and remove programs and I no longer see them listed. When I go to Windows update page it now list 26 updates. When you do a repair install are Windows updates saved?
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