Selecting the installation you want to repair is just chosing which installed copy of windows 2000 you want to repair (for systems with multiple OS's) Most End Users would just have 1 choice - choose wisely, indoshakemaker-san. (If it can only take 1 character, look above - see if there is a list if so press <1> and <Enter> if not type the drive letter that your OS is installed on (most it is 'C' - some - it's not :P))
On that second question - simple answer - Yes. There won't be any problem with the new HDD reading the old one. Just as a safety precaution, though - I like to unplug my slave HDD during new installs so as to not 'accidentally' format the wrong drive in the set up process.