Well, i did this a couple of years ago and the only problem i had was i ended up with 2 users, 2 all users, 2 local services, and 2 network services in the documents and settings folder. This also meant that the programs i had already installed could not be accessed by the new user and i could not access the old user listed. BUT, the system Kinda worked!! DigiKiwi did not explain this by he is right in that it will be far easier to reinstall XP on the computer and start from scratch than trying to run it as is.
If you can borrow a XP Cd from someone and you have the activation serial numbers from the computer with the bad hard drive, you can call microsoft and more than likely get new registration numbers to activate the computer. I have really had no real problems with Microsoft there. There should be a sticker on the back of the computer with the activation numbers.