why don't you keep the old one as a slave?
Swop over the old drive for the new, ensuring it is set as master at the back.
Then install the old one as slave in another available ide channel.
Proceed to install the OS.
I assume it's XP? it will give you the options to partition and format the drive during install.
When you're up and running with the OS installed on the new C drive, right click the old drive in my computer and format it.