Thanks Alec and Billy. Alas after finding and turning off system restore I repeated the entire process without success. I followed the manual to the letter. The only setting I didn't use was turning off the smart sector thingy.
I still get a successful copy but when I disconect the old C drive and change the jumper on the new one to primary I get the exact situation described in the first post. It boots as far as the blue XP screen and then hangs.
Any other ideas would be appreciated.
Cheers
Paul