Hardware -- your computer's CPU, memory, chipset (mother board), hard drive and video card have the most effect on the speed of your computer. There are a few settings, as explained below, which can improve performance. Antivirus programs, and real time backup programs like GoBack or SecondChance can slow your computer down. A badly fragmented hard drive can also slow it down.
Unless you've done something to clean up the number of programs that autostart when Windows starts, it's likely there are a slew of them killing the performance of your computer. There's also a bunch of generally useless "services" that Windows XP wants to start. You'll almost certainly never need some those either.
Learn how to eradicate these parasites by cleaning up your Windows start. There's much more good information on pruning startup programs at the Paul Collins site, and on pruning Windows XP services at the Black Viper site.
A bigger hard drive (disk) won't make your computer run faster. That's just an urban myth. The size of the Windows registry and the number of files in the Windows directory does affect speed to a slight extent. Making the hard disk larger won't make either of those smaller.
A faster hard drive -- quicker access time, higher read rate (spindle speed) and larger buffer -- will make your computer faster. Adding a second hard drive is usually a better alternative than replacing your hard drive (unless you have a laptop). It's relatively easy, adds wonderful flexibility, adds capacity for backups and will speed up your computer, especially if the new one is faster than your old one.
First, decide which hard drive to use for Windows. If you buy a faster one -- quicker access time, higher spindle speed and larger buffer -- you may want to make it your primary drive. That will entail either reinstalling or moving Windows and your programs to the new hard drive. You can move them with something like Acronis True Image.
If you move Windows and your programs to the new hard drive, you'll need to make it your "boot" drive. Do that by switching the "IDE" connections (you may need to change where they are mounted) or by changing the boot sequence in BIOS.
You can speed up your computer by locating the Windows "swap" (paging) file on a fast second drive. The best way to do that is to create a FAT partion of 2 or 3 GB on the first part of the fast drive and move the swap file there. Create an NTFS partition or partitions in the remaing hard drive space. [Start > Help and Support > search for "paging file"] You can create the partition(s) with Acronis Disk Director Suite.
Use your second hard drive to store backups from the first one. If you're backing up Windows, you do not need to back up the swap file. Windows can recreate that on the next boot.
For most circumstances the following settings will assure maximum performance of your Computer. (Don't worry about tweaking Windows XP. There are tweaks, but you won't gain much unless you're a hard core "gamer", but then I don't need to tell you about tweaks.