Using Nero, you can just do a disc to disc copy. Put what you want to copy in your DVD-Rom, put a blank in the burner, tell it to copy then sit back.

As far as moving drive space, you'll need to reformat and re-install Win XP from scratch using a smaller C drive (like maybe 5 gigs) then you can set up your other drives within XP. It would be easier to just buy a new hard drive though. Slap it in, format, and you're done.