1. You can easily move existing XP from old to new drive - just go to new drive manufacturer's website and find their utility to do this (if its not supplied already with drive). This is much easier and quicker than setting up a fresh XP install (sorry Freestone, have to disagree with you!). After the transfer, make sure you boot the machine with the old drive disconnected first time (or you may have system drive letter problems).
2. Once XP is on larger drive, I'd disconnect that drive and just do a straight 2k install on old drive (ie, boot from install CD, use its partitioning tools to remove XP partition and create a new one for 2k, then install). Once complete, I assume you want a dual boot - so make new drive master, and old drive slave - boot into XP on new drive and edit its boot.ini file - add this line to it:-
multi(0)disk(0)rdisk(1)partition(1)\WINNT="Microsoft Windows 2000 Professional" /fastdetect
So it now looks something like:-
[boot loader]
timeout=5
default=multi(0)disk(0)rdisk(0)partition(1)\WINDOWS
[operating systems]
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Microsoft Windows XP Professional" /fastdetect /noexecute=optin
multi(0)disk(0)rdisk(1)partition(1)\WINNT="Microsoft Windows 2000 Professional" /fastdetect