OK, I think I've turned the oven on and am starting to cook with gas. Thanks to EVERYONE who posted here for their help!!!!
I managed to complete Step 1 - get my system booting up from the original 20GB HD (which I think I will keep as the original to make things simple) by making it the Master and plugging it into the HD1 end of the IDE cable, and disconnecting the IDE cable for the 80GB HD (which I will use as my slave hopefully). So Windows XP Home boots up ok etc, in other words I am back to where I was at the BEGINNING.
Now my next challenge is to install the SECOND hard drive (the 80GB one) as a slave. When I first booted up the other HD it seemed as though he tried to copy my files across to that drive, and I think that's where WinXP Pro (the pirate one I want to get rid of) is installed.
So if I understood everyone's advice correctly, what I need to do is this:
1. Set the Jumper settings on that drive to SLAVE (I think I'm short one jumper thing though)
2. plug it into the HD2 plug of the IDE cable (NOT the one at the end)
3. Format it (I assume I will use Windows XP Home to do this? Also, do I need to partition it etc? How do you do this??)
I'll wait around for some replies before I do anything. Thanks again for everyone's help.