I went into Computer Mgmt but can't figure out how to format my hard drive
Right click on the drive. You can do this from My Computer as well as long as the filesystem is assigned a letter already.
How do I convert this into useable space and combine it with the 127.99GB?
Easy answer: you don't. You could combine the two into a linear volume with NT software RAID, but that seems dumb. But since NT doesn't come with any real volume management software you're pretty limited, there's always Partition Magic if you're really like to resize the volume to include extra the 58G.
One last question re. partitions - why would you want a partition? what is its function? (sorry - i understand it's a pretty basic question i should know)
Why do you partition a room? To logically divide two or more areas. But with regards to hard disks, I recommend against creating more than one partition per volume. Using partitions to manage data when you can do the same thing, with much more flexibility, with directories is pretty stupid. All you end up doing is causing more work down the road when one of those filesystems fills up and you have to either use something like Partition Magic to resize them or put things on filesystems where they don't belong, thus throwing your organization out the window.