You can use Migration Assistant to move your data, settings and Applications. You can choose the boot volume in the System Prefs, so that's no problem either.
(1) To replace your 320 GB drive, install Leopard on your 1 TB drive and use Migration Assistant to move your data onto the new drive.
(2) Take out your old 320 GB drive and put in other harddrives in the remaining bays (if you want).
(3) There is no step 3.
Note that moving your data might take time (it depends on the amount of data).