OK lets start with the installation I'd recommend you should simply add the second one and keep the first one
here is a guide (with video). I'd does mention changing the jumper settings to master and slave but you don't have to do this if they are both set for cable select and the old drive (the one with Windows on it) is the one on the end of the IDE cable.
So why keep the first one ? If it ain't broke and all that

. If you try too copy all your files across you'll break Windows (even an admin doesn't have access to every folder) and the majority of your programs, why ? well this will be a new drive so all the paths in the system registry will be wrong (as you initially installed it on c: your new one will be something else). The only way to do this, apart from making a ghost image (see below), will require you to reinstall Windows and all your programs.
Your "data" files (music, video, photo's etc) will all be fine to move as you don't install them.
Now you can do what you want by using a ghost program or even Windows back up to create an exact image of your Windows installation burn it to disk, setup Windows on the new drive then put your image or restore your backup but to be honest it a pain and much easier to keep thing as they are.
So what I would do is keep the old one, install the new one move the movable files off the old one to the new one. You can install new programs on this new drive as the it will 'register' properly or if you want to 'move' your old programs you can but you'll need to uninstall them first then reinstall them on the new drive* (if you know what your doing you can do this manually via the registry but if you don't know what your doing it's best to be avoided. This is the least painful way imo.