You'll need to go into the BIOS after installing the hard drive and force your controller IDE/SATA/PATA/SCSI (whichever you have) to recognize it first. If it already contains a partition and the partition is healthy and recognizeable by the OS you have you merely assign it a drive letter via the computer management MMC and drag the files over via windows explorer. If the partition is not compatible (like NTFS on Win98) then you'll need to format it first, frankly I recommend formatting it anyway though.
{edit} Oooops, didn't read far enough did I?
Yeah, the flash drives are a good option here, I don't think you are ready to install an internal HDD yet. Don't forget you'll probably need to assign a drive letter to the flash drive too, unless you install 3rd party bloatware that does this automagically. Right-click on "my computer", choose manage, go to "storage", then "disk management".