How to do a clean install on a hard drive that was taken out of a dead computer

Here's my situation..I have winxp 80gig hard drive and I got an 500gig hard drive with win7 from my bro's computer.. I know I can't use it in my computer because of the licensing issue and because I tried it already and it won't boot up..

Question: If I bought a new win7 installation cd, is there any way to install it on the hard drive that already has it on their?
Keep in mind, my bro's computer died so I can't put it back in there..

Or do I just need to get a new HD?

Thanks for any advice..