Windows 7 on Ibm Thinkpad R40?

I just got a 160 GB HD for a older IBM Thinkpad R40. I want to put Windows 7 on the HD but have run into some problems. I have a CDRW burner/DVD reader in it but because there are no DVD drivers, I can't install from the DVD.

Would I be able to install the Windows 7 DVD from my old HD (which has Windows XP) onto the new HD if I made it into a portable HD using an enclosure? And then would I be able to replace the old HD (with Windows XP) with the new HD (with Windows 7)?

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