You do not need windows on both drives.

If I were you I would place windows on the smaller drive and partion it to leave you some space for saving small programs like word docs and such like and use the larger drive for installing applications like Office.

If you can format both hard drives and make sure that your smaller HDD is set as the master and the larger one as the slave. When you install windows on the smaller one and boot up the machine, open My Computer and you should see both drives C: for the smaller one and E: for the larger one as D: should be set as your CD drive as a windows standard.