That other partition is almost certainly a "restore" partition - it has the Win XP install routines, instead of them being on a CD. It's a frequent trick by PC manufacturers that saves them the cost of a blank CD to write your backup install routine, and screws you up for cloning the hard drive.
I solved it the easy way by buying a Win XP Pro install CD, and copying everything off the existing HD, knowing it wouldn't boot or run. When the PC's HD died, I spent a happy day installing, loading, and copying - and muttering at Mr IBM for saving a few pence for the blank CD. the "restore partition" was, of course, also dead because the HD was dead.
I've not tried it for years, but copying the whole HD to the new one, then running "SYS E:" (or whatever the new HD is) worked for me once upon a time.