1. floppy drives are very cheap (c. £9 here in UK)
2. current state of PCs/Windows, I'd still ahte to be without one.
3. Yes - you can make a 'boot floppy' CD (I thibk I described how to some months ago in another thread - can't remember off top of my head) - BUT why not just buy new floppy drive.
PS. If your 40GB drive is a second drive, you can set it up from within ME. Run fdisk from a dos box in ME - change to second disk (option 5). Create partition(s). Exit and reboot - and new partitions will be available to format (eg, dos, format x:, where X: is new partition).