Best way to keep using old hard drive?

There's no safe way to get your XP partition from your old drive into a partition on your new drive. Also, if you did that, either XP would not show at all or Windows 7 would fail to boot and make both partitions useless, since Windows Bootloaders are only compatible with older versions (Ie XP can't use 7's bootloader, but 7 can use XP's) My advice is that if you have a desktop, get the old drive in there and see if you can run the XP using AHCI mode from the BIOS screen (unlikely unless the XP is x64, which is also unlikely in the first place). If not, then you'd be better off just looking for legacy parts to build an old computer for gaming. Newer systems aren't very nice to XP. I too have had to deal with leaving XP behind. But there's usually a way to get old games to run on 7 anyways. Sorry bro.

Also, as for booting via USB, that wont work since halfway through the boot sequence, Windows loads its own USB drivers, resetting all USB devices, including the external drive itself. The result is a failed boot, and is pretty much impossible.

Yes, but if you are wanting to keep the OS because it's XP and you are not wanting to switch to Vista, I recommend that you take the leap to Vista, it's really not the big deal that everyone is claiming it is, since SP1 was released, it's really just a fancier version of XP and runs the same. Regardless of that, what you'll want to do is install the old hard drives into your new computer, assuming that you have room for them. If you have a custom case then you probably do, if you have a store-bought system then you might have room for one inside but likely not both. To install it, make sure you are wearing an anti-static wrist strap (you can purchase one at any computer store, they're cheeeeap). Install the hard drives into the available empty hard drive slots, then install the drivers for them on your system. Once you've got the drives recognized as existing on your system you're good to go, you can access the files on those drives by going through My Computer. If you want the system to operate from the OS on one of those drives, then you simply go into the BIOS and change the master boot device to whichever one of those drives has your OS on it, save and exit, reboot your system, it should auto-boot from the drive you specified. If you want to change it back, simply go back in and change the master boot device. Hope this helps.

well cleaning the data from the drive and using it as a data storage would be a good choice as, booting from a compromised drive is not a good option.