OP, what you propose won't work. Start here with the M$ tutorial:
http://windows.microsoft.com/en-US/windows7/help/upgrading-from-windows-xp-to-windows-7
The key point is that there is NO way to do an in-place upgrade from XP to Win 7. You MUST do what amounts to a fresh install of Win 7.
There is a tool to help with a lot of it, called the Windows Easy Transfer utility - see tutorial tab 2. It will NOT transfer your applications for you. You will have to do the fresh install, then re-install all your applications under Win 7. But after that the Easy Transfer tool WILL help you move all your old settings and data files onto the new system. Very basically, Easy Transfer is installed and run on your existing old drive and system to create one huge file with all the required info. Then you do your new install. After the Win 7 system is running you hook up the drive with the Easy Transfer file on it. Then you run that same tool, already built into Win 7, to copy your old stuff to your new drive.
The tutorial page points out that the Easy Transfer tool makes one VERY large file, so if your old HDD is pretty full you should seriously consider getting an external hard drive unit that does have the required space.
With this in mind, I suggest this sequence.
1. Download / install Windows Easy Transfer on your old system. Choose a device and place to put the big file of existing stuff. Run Easy Transfer and make that file.
2. Build new computer with new SATA HDD but do NOT install your old IDE drive in it. If you bought an external drive unit for the transfer stuff, don't connect that up, either. Install Win 7 on the new machine, do all your updates, etc.
3. Install all your applications software in the new machine under Win 7. Update them as needed.
4. Connect your old IDE drive in the new machine and let Win 7 find it and give it a name, ready to use.
5. If the Easy Transfer file is not on the IDE dive - if it's on an external unit - connect that up. Now run the Easy Transfer tool built into Win 7 to retrieve all that old data and settings file stuff onto your new Win 7 system.
6. Use the finished system for a while. Don't change anything really significant on the old IDE drive until you are SURE all your old stuff was transferred, and you need NOTHING preserved on the old IDE drive.
7. As a last step, use Windows Disk Management to completely clean off the old IDE drive. By that I mean, Delete all its existing Partitions, then Create a new Primary Partition that is NOT bootable, and Format it so you can use it as a storage device.