I would install the 100GB as an additional drive in the system, leaving the existing 40GB for the operating system and software, and move your data files over to the new drive. I think there's also a way to remap Documents and Settings to be on the new drive rather than the system drive (amazing how much stuff collects there).
If you have other plans for the 40GB (ie, you plan on making the new drive the system drive), best solution is to do a reinstall. You could probably move an image of the old drive to the new one, and it would probably boot, but my experience with trying to move a Windows installation to new hardware is that it is far less a headache in the long run to bite the bullet and do the reinstall (you'll probably wind up doing it eventually).
My other thought was to the size of the drive; 100GB is a relatively small drive these days. While those 500GB Deskstars may be a bit extravagant, a 250-300GB drive might be a better investment long-term. $/GB seems to be pretty flat up through that range. With the larger (ie newer) drives, you also benefit from things like bigger buffers.