Hope you enjoyed your holiday. I spent seven days trying to do all things that my mother wanted sorted on her computer - and didn't get the list completed!
Nope. 80GB isn't really enough space for two, is it? I'll get saving for a 120GB (at least) drive, haha In the meantime, a full backup of XP for those Just-In-Case scenarios of Windows 7 failing altogether will suffice (I hope!).
It's horrid what a couple of years can do to your perception of hard drive space. One of the things I had to do for my mother was adding a new external hard drive that someone had given her. I looked at it and thought, "That was a bit mean, only 500GB." And then
I thought - "Listen to yourself. Remember when 5GB seemed like a humongous HDD"
However, I did want to make a point about hard drives. I checked the specs of your machine, and you only have an IDE connection, which means you should be careful not to spend too much on a HDD which won't transfer to a more modern machine which will be set up for SATA drives. So I was going to suggest that you put a new external USB drive on your Christmas list (if you've got relatives who understand that the right external hard drive is a really good Christmas present!).
BUT I also see that the basic specs of the DIXONSXP Ei 314 only include USB 1.1 If you haven't upgraded that, then a quick trip to eBay (or even Maplins) might yield a PCI USB 2 card for a tenner, and that will certainly speed up your scanner and printer. It is also IMO essential for external hard drives.
Your other alternative is to risk eBay, or even Freecycle, and a get 2nd-hand hard drive - making sure that it's not too big for your BIOS to handle.
A final suggestion about your setup. It may be that this is unnecessary in Win7, but it's worked for me for several versions of Windows. I've already recommended that you consider partitioning your hard drive - it's easy enough to do. Another thing that I've done for ages is to make sure that my first optical drive is labelled as the "M" drive and the second as "N". I do this precisely because I may want to partition my hard drive, or add in a second one. If you add in another ordinary hard drive, your machine will call that the "D" drive, and re-label your optical drive(s) as "E" and then all your other drives following that.
Now suppose you have a program which expects to find its installation media, or its verification CD in drive "D" - because that's where the CD was when you installed the original program. And now, of course, it's not there, which can be a real PITA. And all your USB drives will similarly have to move a notch.
SO, what I do, first thing with a new machine is to change the first optical drive to "M", and (if it's there) the second to "N". When I put other things like flash drives in, I allocate them a number nice and far down the alphabet. That way any partitioning, or new additional drives can grab the early letters without re-labelling every other device with a drive letter.
Of course, Windows 7 might make all of this redundant. But then again, it might not. Give it some thought.