Someone explain this to me please.

Yup - sounds do-able. If it is a new windows (brand new OEM or Retail license) then you won't have any issues with licensing.

As for wiping the old HDD for use with the new system - when you install windows on the new machine (booting off the DVD- set the DVD to be the first priority boot device in the BIOS, HDD second) you have the option in one of the first step to format the drive. If you do this it should wipe it clean, ready for a fresh windows install.
 
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