I don't think it matters which drive is plugged in to the cable in the middle or at the end, just as long as one of them is set to Master and the other to Slave.
If you keep with your proposed setup, I would double-check four things:
1) Make sure that the new hard disk and the CDRW are being plugged into the secondary IDE channel. It should be labelled IDE2 on the motherboard.
2) Make sure that the new drive is definitely set to slave and the CDRW is definitely set to Master (or visa versa). Those jumper settings can be a bit confusing sometimes (on some older drives at least) and could be ambiguous.
3) Make sure the red stripe on the cables is aligned with pin 1 on each drive. Sometimes this requires you to twist the cable between drives, since not all drives have pin 1 on the same side. If there is no diagram on the drive label, sometimes it is inscribed faintly on the back of the drive, just below the pins (often with a 1 on one side of the pins and a 40 on the far side). If that's not the case, sometimes there is a 1 printed on the circuit board of the drive (if it is exposed) where pin 1 attaches to it. If you don't see any of those things, sometimes pin 1 is attached to the circuit board with a square weld, while all the others are circular.
4) When you first start up the computer after connecting everything (check the power cables too!), enter the BIOS (usually F1 or Del or Esc during the first few moments of startup--it should say on the screen), and make sure that the BIOS has either autodetected the new hard disk (save the settings and exit) or that you run a utility often found in the BIOS to "Autodetect Drives" (the wording may vary). Make sure you choose the "Save and Exit" option or these settings won't be saved.
Once you get it to boot off the old hard disk, you can partition and format the new hard disk, leaving you 80 Gbs of free space. Be very careful while doing this to make sure you are partitioning and formating the new drive (drive D:, not drive C: ) or you will lose everything on your existing hard disk.
Now, if it were me, I'd put both hard disks on IDE channel 1, with the new one as Slave (at least for now) and then put the two CDROMs on IDE2. You should still do all of the steps above if you go with this alternate setup.
Another Alternative: you might want to consider setting the new drive up as the Master (drive C: ) on the primary IDE channel (I'd leave the old hard drive out of the computer until the new one is set up and working). To do this, first make a boot floppy with FDISK.EXE and FORMAT.EXE copied to it (do this with your existing setup, before installing the new hard disk--more on this below). Then you can install the new hard disk as Master on the primary IDE channel, start up the computer, set the BIOS settings for the new hard disk, boot off the floppy boot disk (in other words keep it in the drive during startup, which will give you an A:> prompt when it finishes booting), run "FDISK" and "FORMAT C: /S" to partition and format the new hard disk, and install your operating system there.
The Floppy Boot Disk: In order to install your operating system from the CDs (once you have formatted the new hard disk), you will need to include a few other files on the floppy boot disk. This is so the computer has the programs and drivers it needs to recognize the CDROM drives and use them when you boot to drive A: in DOS (as opposed to Windows). You should create this boot disk with your existing setup before you make any changes to the computer so you have it ready later on when the new hard disk is installed and there is not yet any operating system installed on it (this assumes you are following the last alternative outlined above).
In addition to the FDISK.EXE and FORMAT.EXE programs mentioned above, copy the MSCDEX.EXE program (all of these are often found in the C:\WINDOWS\COMMAND folder but the MSCDEX.EXE file might be in your root directory) and your CDROM's driver file to your floppy boot disk and include a copy of the CONFIG.SYS and AUTOEXEC.BAT files that enable your CDROM drives. These last two files might have a lot of stuff in them and you can ignore most of it, but make sure the copies on the boot disk have the following settings. Your CONFIG.SYS file on the floppy should have a line that reads something like:
DEVICEHIGH = C:\AOATAPI.SYS /D:IDECD000
(where AOATATPI.SYS is your CDROM driver--this may already exist in the copy of the Config.sys file on your old hard disk, just make sure the driver is included on the floppy too)
And your AUTOEXEC.BAT file on the floppy should have a line like this:
C:\WINDOWS\COMMAND\MSCDEX.EXE /D:IDECD000
(again, a line like this might already be in the Autoexec.bat file on your old hard disk, but it may have been disabled by Windows, which does this by placing a REM in front of the command in that file. Just remove that REM and anything else preceding the actual command shown above in the copy of the Autoexec.bat file on your floppy)
Booting with a floppy that has those files on it should enable your CDROM in DOS, which will allow you to install your operating system on the newly formatted hard disk.
Finally, you will probably want to re-install your old hard disk as drive D: (as the slave on the primary IDE channel) so that you can copy over any files you want to keep. I wouldn't just copy all of your programs over to the new drive, instead you will need to reinstall the ones you still use. Just copying programs over won't work anyway, they have to be reinstalled to work (unless you boot from the floppy and copy the Windows folder over too). Reinstalling gives you a fresh install without all of the junk that has likely accumulated over the years on your old hard disk (and in your Windows registry). Copying your data files over selectively to new folders on the new hard disk will help you reorganize all that old stuff and you can keep the old drive as drive D: indefinitely in case you forgot to copy over anything.
I suggest this last alternative because the new drive is almost certainly faster than your old one and might improve your computer's overall performance quite a bit if it were set up as your boot drive and had the operating system on it.
Also, with regard to keeping your CDROMs on the secondary channel, the reasoning is as follows: 1) the hard disks are probably physically installed close to each other and it is easier to use the same cable to connect those two, likewise with the CDROMs; 2) Copying (or installing) from the CDROMs to your hard disk(s) may be a bit faster if they are on separate channels (no proof for this, but it seems kinda logical to me).
I hope some of that helps!
P.S. - And I bet some of you have always wondered why you have to pay so much to get computer technicians to do this stuff for you!