[Fyron]

Which way he was asking (independent installs or installing to the 500 GB with the other drive still in place) isn't entirely clear (probably because he was implicitly asking how to do this). The safest bet is to plug just the 500 GB in, install XP Pro, then reconnect the old drive to copy files over. No need to worry about your MBRs in that case.

=0=

Two independently installed* copies of XP on different drives will not interfere with each other. Each drive will have a separate MBR, and only the MBR from the first drive will be used for booting. The NT boot loader does not try to detect other OSes at bootup; only the Windows installer application (and the fixboot/fixmbr apps on the recovery console) does this. The files on the second HDD are treated just like any other set of files; Windows won't randomly start thinking system files are on D/E/whatever. You won't be able to boot the second install up without changing your hardware configuration to set its drive as the primary master (or taking the other drive out so that it is the only drive). When you do, it will again not do anything to the files on the secondary drive. You do not need to "hide" one OS from the other if you connect two drives that each have an OS on them that was installed independently.

If you set the old hdd as a secondary drive, then instal XP on the new 500 GB drive, you get a multi-boot setup. AFAIK, there is no way to avoid that (without some interesting settings on a customized unattended install disk), as it is done automatically when the installer detects a pre-existing OS (assuming you don't choose to upgrade that OS in place). You can take the other OS out of the boot loader after the fact, naturally. I forget if Windows installer will use the old MBR and just add the new info to it, or if it will ignore it and create an entirely new MBR on the first primary partition of the primary master drive with info for booting both OSes. But either way, the OSes themselves will be intact, and you can simply restore a working MBR on the old HDD (after taking the new one out) with the recovery console on the XP cd to get the old install of XP working again.

* Meaning you put in one drive, install XP, take it out, put in the other drive and install XP on it.

SJ:
Win98 had a really primitive boot loader. It did not try to gather information about all installed OSes and manage them from a single MBR.