There is probably no need to run a repair/upgrade on your drive as it was working properly. But by allowing your PC to work with that first, you can set-up all your drivers etc on your 160gig drive and when all is running well as windoes XP replace your 500gb drive ensuring it is set as a slave and you should not have any problems.
As a matter of interest, what is shown in your post screen about your drives?
It was running propally on a diffrent hardware setup, differant motherboard, processor, ram. It's a diffrent computer! No way will windows "Just work" on completly diffrent hardware!
Media555, i would suggest removing 500 gb drive and linking the 160 gb drive up to sata 1 and only that drive. Then boot from the windows XP installation cd.
It sounds as though you are not getting into the windows installtion at all.
1) First enter bios and check that your cd drive is set to boot priority 1.
2) (You will be prompted to press a key to boot from this cd media). When asked if you would like to press a key.
3) Let setup load drivers etc, and when asked if you would like to repair the installation say no.
4) Accept the license aggreement.
5) Now when you are presented with the list of hard drive request a repair from this menu. (R)
I have had to do this hundreds of times upgrading motherboards and cpu's in servers.
Windows is set up with a diffrent driver base so will not boot from that harddrive intill you have reinstalled the correct drivers for your new motherboard.