I'd go with Keef's suggestion - keep the existing C drive and move all data to the new one, assuming that you have physical space and power for 2 disks (and power cables, brackets etc.).
None of my XP PCs have C:drives larger than 40 GB - and none are half full, even with all the "My Documents" folders on C.
You can also easily create a Program Files folder on D: and install programs there as well (but you can't just copy & paste from C). Just bear permissions in mind if you are using NTFS with security enabled (IIRC you can't do that with XP home)
I would also suggest that you move the swap file to the bigger disk, deleting it from the existing, simply because it will be a faster disk - although it will also claw a couple of GB back on C.
And absolutely as Twiggs says, backup critical data before starting - you cannot be too careful!
SD