Many questions, all at the same time. Where to start?
Can I use this 80gb disc as master and the old 40gb disc as slave on the same cable? YES
will I be able to read data from the smaller disc onto the new one easily: YES
should I install SP2 onto the new drive before I get too much data onto it: YES
I do not have SP1 does this matter: YES
Can I partition the new drive off and install everything from the old drive onto it: YES
That is 6 questions. it can all be done. Which question would you like to have the answer to first.
Each one will attract answers from members. It will prove hard for both you and the fourum members to work out which suggestion applies to which question, and confusion will reign.
But all good questions, deserving a reply.