installing vista on old hard drive and couple questi

Greetings,
First I want to thank everyone for their time and effort in helping those of us new to this.
I got into the Beta 2 of Vista and want to try it out. I downloaded the x86 version and did the MD5 check to make sure it was correct. I then burned the ISO to a dvd using nero. I have burned ISOs in the past so there is nothing new here.
I wish to use vista on an old PC incase I screw something up I am still able to work.
my old PC has 2 seperate hard drives. C: is a 20 gig with win2000 pro and D: is 80 gig for storage.
My plan is to remove my C: drive from the PC to preserve my 2000 and replace the C: drive with another old hard drive. This new hard drive is a 60 gig with xp home on it I think.
I do not plan to partition the new C: drive but just let vista have the whole thing. I will boot from the dvd to install the os.
Will Vista format the new C: drive for me during install? and if so, what format should I use? ntfs or a fat32? the reason I ask is that my storage drive (D:) is in fat32.
Once I have Vista installed and all drivers working on my new C: drive, will I be able to just switch between my vista C: drive and my old xp C: drive just by swapping the ide and power cables? The system bios should remain unchanged if I am correct.
Thanks in advance