You didn't goof anything using the quick format option in the XP installer. And no! you won't even touch or need to do anything with your storage partition. That's a totally separate item there.
If you end up reinstalling Windows which is possible if you saw a bad install to start with a good reformat or even new 120gb won't effect anything but what is on the 120gb. When you say old personal files what type of things without getting personal are you trying to see go on?
One thing to take notes on is any information seen on any blue screen since the error information will point at the actual type of problem being seen. If you are simply copying files and folders from the old drive onto the new and trying to make things run that will lead to problems. Any programs installed there will need to see a fresh install on the new drive.