Should we unplug the XP drive before adding the new drive and installing Win 7?
In my opinion, yes. Have only the new drive and the DVD drive plugged in when you boot from the Windows DVD and you're assured of getting a clean installation. The drawback is that you'll have to re-install your application software manually. Do be certain that you've got your BIOS set to use AHCI mode before you start the installation.
If she uses the new drive with Win 7 as the primary OS, will she be able to access the data files on her old XP HD?