Can I transfer my OS (XP SP2) onto my new hard drive?

Actually- you can do this. EVERY drive sold comes or has available at the website software to copy over your current system configuration. The SATA will automatically be seen as a master, and just put the old master in and just run the software. I'll walk ya thru it if ya wanna ping me. A fresh install is better in the long run, but tranferring is done all the time