First off, consider an external USB or firewire drive (Internal drives are faster, so keep your operating system on that.)
You can get 500Gb for about £60-£75 (Amazon, Dabs, etc.)
They're only really worth considering if you have USB 2.0.
Slightly more expensive are NAS (network attached storage) drives, the same idea as above, but you can connect them to your broadband router and access them from any of your computers (or, if you want, from the internet). They're about £70-£85.
I use Buffalo products, and they seem to be good. They make both of the above variants.
Alternatively, if you don't want to rely on mains power, Western Digital Passport Drives are a compact and stylish alternative.
The above options are good because they need minimal installation and can be moved between computers very easily.
If you really need an internal hard drive, then you might need to get advice on which products are suitable for your computer. Fitting them yourself is pretty easy, but you need to be careful handling them, need to set slave/ master pins correctly, need spare power/ data connectors (or need to go and buy the cables) and need to connect your HDD/ optical drives in the right order. All of this was explained in the instructions that came with the last HDD I bought.
If you're paying someone to fit it for you, it takes about 30mins (max) to physically install the drive, say an hour overall including setting it up, formatting it, and so on, so that should give you an idea of a reasonable price.
As for imaging the drive, this is only as expensive as the software that you need to do it (about £30). I wouldn't do it, though... that hard disc has got to be pretty old now, it could fail, and if all your files are spread across both discs, you're screwed. Keep them separate, and use the old drive for less important data.