Buy the new drive. Remove the old one for now. Order the recovery CD from HP then reload the system.

Once it's loaded, you can try installing the old drive as a slave and if you're lucky, copy over any data that is wanted.

I don't see a link on the HP web site to order the recovery CD for the 523n, so you will have to contact HP and see what's available. Try here:
Contact Support and Customer Service HP Pavilion 523n Desktop PC (US/CAN) - HP Customer Care (United States - English)

Good luck getting the disks. I was given an un-needed older Compaq (without the disks) & I contacted HP to order some & they said that sense Vista came out they stopped providing XP recovery disks but that doesn't mean that he can't try. I already made a comment about an OEM version on newegg.

Edit: I forgot that I already posted on this.

I contacted HP via online Chat. You're correct that they nolonger provide XP recovery disks. However, they did link me to an HP Recovery site (vendor) that will sell me the disks (8 disk set) for $27.00. In further conversation with HP Chat, they nolonger have the 80gb OEM harddrive for this computer. I'll need to buy one elsewhere and will check into that. After I get the $$ cost figures, I'll see if my friend wants to proceed or simply buy a low end computer. Thanks for your continued interest and suggestions.

Thanks for the feedback. Can you post the link to the vendor site?

Sorry for the delayed update. After much searching, I determined that it was too expensive to buy a new HD and recovery cd for this old computer. As a last resort, I checked with a local computer repair company that offered a free evaluation/consultation. I dropped off the computer yesterday at 1PM and they called me a little after 2PM. They said that the HD was ok and that they could fix the problem, load a new copy of XP Home and install AVG (free edition) anitvirus/antispyware, for $70 bucks and guarantee it. I checked with the owner of the old HP and he said go with it. I picked up the computer at 5PM and brought it home. I hooked it up and started it.....booted up with no problems. Also, no HD clicking at all! Anyway, it now runs like a champ. Finally, thanks to all here who offered their advice and expertise. Ohheck.