You can add the second hard drive now as a slave drive. You may need to change jumpers on your present drive, and may need to enter BIOS setup so that the motherboard can find the new drive.
You need to decide if you are going to format the driveas a FAT32 or NTFS volume, and if you are going to partition it as a single large drive or several smaller volumes.
Check out the partition planning article at http://www.aumha.org/win4/a/parts.htm
Once you have the drive installed, you can safely move data files to the new drive.
Yes, you can upgrade to XP Pro with at least the retail upgrade version. I am not sure if the OEM version of XP Pro will allow you to upgrade your home version to pro.
Since your drive is full, I recommendthat you check the following areas, and see if you can free up some additional space.
C:\documents and settings\user name\My recent files
C:\Windows\Temp
C:\Windows\Temporary Internet files
You want a minimum of 2GB free space on the C: drive and preferably 5GB before installing XP Pro.
Chas