Hello, and Welcome to
techhelpforum.
Yes, you can certainly do an install on the 250GB drive. All you'll need is your XP CD, and product key.
A few things though....
Is your XP CD a retail version, or a factory Restore version which came with the system?
Retail Version CD:
I would physically disconnect the old drive from the machines power and data cables and put the new drive in it's place on the cables. This will make the new drive C:, and eliminate any dual boot elements.
If you have an ISP that's "on all the time", I would disconnect your LAN or Modem until the install is complete. Once you complete the install, install an Anti-virus (I recommend
Avast), and a firewall (recommend
Comodo).
Then reconnect your ISP access cables and let the A_V and Firewall perform their updates. Then perform your Windows Activation. After that, you'll have to reinstall any updates and any other software you have or use.
Once completed, you can reconnect the old drive as a second drive on secondary cables and copy any personal files from it to the new drive. (Email, Favorites, Documents, Pictures, etc)
Factory Restore CD:
Some of these won't complete if there is a major hardware change from what came from the factory. Although, a new hard disk of larger capacity will probably not affect the restore, and it would proceed without problems. I just wanted you to be aware of the possibility, just in case.
Post back with your results and any further questions.