I'm actually curious as well. I just got my 120 GB hard drive in the mail today and guess what, I can't use the transfer cable I bought because they gave me a burned copy of the transfer CD instead of the original one. So now I have to either find someone with one who can mail it to me or figure out another way of transferring my stuff across.
Since I have a 256 MB memory card, I'm thinking maybe I can just transfer my saved games and stuff across with that. Sure, it'll take a while, but it's still faster than waiting for a CD to come in the mail. Is this possible? Basically, is the transfer cable just a more convenient way of transferring the data (vs using a memory card, which takes longer and most people don't even have), or does it actually do something else? I'm aware I'll probably have to do the license transfer after this, and that's fine. Only thing I'm wondering about is the actual data transfer.
EDIT: Actually, it looks like I'll be able to transfer my stuff with the memory card. I have my gamertag on the card so I can bring it to friends' houses, and after plugging in my new hard drive, I'm still signed in and able to use everything. So to answer your question, hennessy, you should be able to just plug in the new drive. Only problem is you'll lose all your saved games unless you have a memory card or transfer cable to bring them over. You can at least recover your gamertag.