ok overclocking on the 70gb hard drive would be a good dea. Also reaching 3ghz is a realistic target so no real problems there.
So here's what you;d need to do. Pull out the 500gb hard drive, make sure the 70gb drive is set to the master drive if the drive is IDE, if the drive is sata you can ignore this step. Then install xp on the 70gb drive (32 bit or 64bit your choice). Then start overclocking in small steps, say try reaching 2.8ghz stable first and monitor temps and voltage. If everthing is all good then try for 3ghz. Once the overclock is fully stable and tested you can pull out the 70gb drive, reinstall the 500gb drive and you'll be good to go