Hi Billy,
You can do that, but you're best to just store your files there (things like Word documents, music, videos etc). And yes, you can just copy (or move) the files across to the stick and be done with it. Whenever you save a new document you'll need to manually choose your USB stick as the place to save the file. If you'd like we can make it so your 'My Documents' folder (where many programs save to by default) is on your USB stick. Since you're not very technical though I wouldn't recommend this. Keep it simple instead.
I don't recommend trying to run any programs from the USB stick. For starters USB sticks are very slow, so it'll slow down the speed of opening programs significantly if you do so. The main reason though is that most programs get installed to the folder 'C:\Program Files'. They expect to be run from there, and many programs will not work if you copy them from here to your USB stick.
One last thing to be aware of - as well as being smaller, 40GB hard drive are slower than larger drives (simply because they are older). If you're coming from a bigger drive, you'll likely notice your 'new' computer is significantly slower than the old one, particularly when booting up and when you first open programs.
