1) I'm sure IDE optical drives are still available. They haven't exclusively switched over to SATA to my knowledge. Should be cheap.

2) ans 3) As long as the SSD is larger than the original C: drive, then yes a byte for byte copy should just work (using dd). To make use of the extra space you'll need to resize the partition afterwards. I'm not sure what's the best (free) tool these days to resize NTFS

4) Don't know for sure but you can always try. Worst case you can put the old C: drive back in. As long as it's a properly licensed copy, I don't think MS will have any issues authorising the new hardware particularly if it's XP. I did it just recently using Acronis True Image Home (paid for app) and had no issues.

5) Yes. Boot Knoppix and run dd from the command line. It should be as simple as "dd if=sda of=sdb" where a and b you will need to determine. It may be best to disconnect any other drives whilst doing this to prevent overwriting something else. Don't assume sda would be the original C drive. Sometimes they come up in a funky order. I'd use "hdparm -i /dev/sda" etc to print the details of the drive and then you look at model numbers and serial numbers

6) Not necessarily. There are some things I don't like in Windows 7 that work just fine in XP.