I am finding my hard drive is running very low on space. Down to around 3GB. It is a 40GB hard drive which i partitioned into two drives and the C drive contains Windows XP. I want to buy a new hard drive and transfer my files and windows to it, but dont want to reinstall anything. is this at all possible?

Yes it is possible. The term you want is Cloning or Ghosting. Some drives come with suitable software on floppy or bootable CD to enable this. The other option you may consider is to simply get another harddrive to use as storage and connect it as slave, or get an external drive with USB connection, or if you do not have a spare IDE connection a PCI IDE controller card can provide room for extra drives. Depends on your system and available power/interface connections and drive bays. Your system may also be able to take SATA drives without any extra controller cards. Your motherboard manual will tell you. If there is nothing physically wrong with your current drive then you may be able to move enough files onto a secondary storage to give windows the room it needs. I used to have a signature but it disappeared and I just couldn't be bothered writing another so please feel free to ingore this.