My HDD is 150Gb, but the main (and only) partition is only 127Gb. Is there any way to reincorporate the extra space, or would I need to reformat? (and if not, will formatting the empty space as an extra drive mess my OS up? I've heard bad things about multiple partitions.)
Oddly enough, I've never tried to combine partitions, but I've never had an issue with having multiple partitions, in fact I've had 2 partitions for a bit over 6 months now with no issue, and at other times have had dual-boot setups and single-OS multiple partition setups without issue using Windows XP, Vista and Ubuntu 6.06 and up.
Your running XP sp2 yes? That sounds remarkably like the LBA issue earlier windows versions had You may have something funky going on in your bios.
Can't you resize it in Disk Management? Right-click 'My Computer' > Manage > Storage > Disk Management