Easy migration to a new system on Windows XP & Windows 7
I have done this enough number of times in my job that I can confidently say it should be the only way to migrate. This also works for Migrating between Windows XP (old system) and Windows 7 (new system)
Windows XP has Windows Easy Transfer utility that allows you to transfer settings and data files. It works best if you have an external HDD to store the data during transfer. Alternatively you can backup over the network but I find it very slow. If you are a system admin you can also backup to local drive and then move the physical HDD to the new system before restoring.
It is easy to use and all it requires is to follow the on screen instructions. Remember to install all applications that you need on the new system before doing the transfer. Otherwise settings for those apps will not be migrated.
Both utilities (XP and 7) also allow customization of settings and data files to move. It is possible to select or exclude specific applications, drives and folders during this process.