The computer seems fine, especially if it was running optimally before hand. By mixing the different speeds of drives can be an issue. 5400RPM is 5400 revolutions/minute which is how fast it can access data or move the arm to a new file, which is considerably slower than the 7200RPM of your current drive.
If it is old enough to be at 5400RPM it is also (without getting technical) more inefficient, there have been great improvements to harddrives in the last few years. One way to see the laps in your new drive, if you have the recycling turned on for both drives, empty it..... you still with us? That little pause is your computer stalling to wait for the slower drive. If there is that much pause on a simple operation, that will explain the slowdown in a format.
Ex:
my old 20GB 5400RPM took ~24hrs to format or a little longer
where as i can do my 160GB 7200RPM in a hour or less.
*basically you got a bad deal and it just is slow.
hopefully you didn't pay much for it.
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