I just did this with a new Western Digital hard drive. I had trouble as XP acted like a complete bastard as do all Microsoft products and would not boot up, kept giving me a error with the registration.
So.... I ended using the tools to copy the image, I then re-installed my OS, making sure I had backed up "My Documents" folder" and my .pst file. When I was finished, I dropped these back in place and I was done except for the updating of Windows, Office, etc.
All in all a real pain in the ass. In short, if you can, invest in Ghost or something similar, the tools with my hard drive, kinda sucked.