Teach me how to upgrade my MBP please

OK, so here's the deal. I finally ordered an OWC 120gb ssd for my 2008 MBP, to complement the 750gb that is in it now. I intend to get rid of the optical drive.
My question is, how best to set it up.
First, should I install the ssd in the optical bay, or put the hdd in the optical bay and the ssd in the hdd bay?
Second, is there any way to avoid a reinstall (Lion)? I would love to not have to reinstall, and to somehow move my os, apps and some data to the ssd while leaving most of my data on the hdd. Clearly I can't clone the drive, since the 600gb or so of data won't fit on the ssd, so what are my options?
Third, is there a third? What else should I think about?
Thank you!

You need to get a 3rd drive - backup all your data - either use Time Machine, SuperDuper! or CarbonCopyCloner. My personal recommendation is SD! if you're only using one method of backup.

After you verify the backup, wipe both drives (after you get the SSD installed).
Install Lion onto the SSD.
Move your home folder to the other HD - lots of how to's on google.
Then use Migration Assistant to reimport all your data from the backup.