If the existing setup is ok and you don't
need to rebuild, you could consider simply copying the image of the old drive to the new one and then just carrying on as though nothing changed (after replacing the old one with the new).
Hard drive manufacturers (eg.
Maxtor) supply the software do do it for you and there are freeware options too (e.g.
Clonezilla).
A rebuild is also an option and never a bad idea if the PC is not performing like it should (or used to). I reimage this used and abused laptop three or four times a year but if you're happy with the way things are working now, then consider what I suggest.
You don't say if it's a desktop or laptop - if desktop you can copy the disk image by connecting both drives to the motherboard, either on separate channels (two ribbon cables into separate plugs on the motherboard) or on the same channel, with the new drive as "slave" (i.e. on the same cable). If it's a laptop, you'd need a USB adaptor for the new drive - Clonezilla is good for this method.
Most desktop BIOS's (and Windows) are happy to plug and play - usually no need to fiddle with settings. Just set the jumpers on the drive to "autoselect" or "cableselect" and they'll be happy enough.
I don't know how confident you feel, so if this all scared you go with the rebuild option that you suggested and then copy what data you need from the failing drive by USB (before driving a 6" nail through it and chucking it away, if it
is failing).