No,
Patch your install up to Service Pack 1, dont install SP2 quite yet....
Once SP1 is installed, you can run a command called DISKPART from the command prompt (or start / run / command)
Once your in diskpart type
select disk 1 (or 2,3.... depending on the config. type list disk to find out)
then
select part 1 (if you have multiple partitions then use list part and pick what you want)
finally
extend (this will extend the partition from 127gig to whatever size the disk is)
If you perfer to partition the disk into several partitions, then you can skip diskpart altogether and just make additional partitions.
If you make the 'mistake' of installing SP2 before extending the disk, DISKPART will tell you that you cant extend the system/boot partition. However SP1 allows it. Thats why you need to change the partition size before installing SP2.
Your other option is as you say, get a Windows XP+SP2 install CD. (Again SP1 is sufficient, anything newer that the original release supports larger partitions.)
Once this is done, you can then install service pack two.
