Transferring data to a new computer | Talk it up | Forums

I just bought a new computer to replace the 10-year old Windows XP that has gotten too small (for all the Giveaway of the Day programs that I have downloaded). The old computer has a 40 GB hard drive and I have been using a 500 GB external hard drive with it. My new one is a 2nd Generation Intel Core i5 with Windows 7 Professional.  What and how should I transfer any data from the 40 GB hard drive to the new computer? It has a 2 TB hard drive so I don't think I will ever fill it up. I am guessing that I can transfer everything from the external drive to the new computer and the files will find their way to where they belong. I'd like to retire the external drive, maybe use it only for backup. The 40GB hard drive I think has the XP operating system, some program files (til I ran out of space and had to start putting them on the external drive), and I'm guessiing the settings for FAVORITES and PROCESS LASSO passwords.  What should I move to the new  computer and how?