So I was cleaning and dusting out my case and replacing some old noisy fans... I tried to remove my CPU fan to dust it and install a thermometer control panel in the front. I removed the fan but it was attached to the heatsink. The coating between the heatsink and my processor was too sticky and it pulled the chip out. Obviously since I'm kind of clumsy and have stubby little fingers, I bent some poles on the chip.

It was about time for an upgrade anyways as it was a P4 1.3 on a end of the line intel board that MDG sold for about 5 minutes. My question is:

Can I just plop in a new Asus board with an Intel Core 2 Duo chipset? Will it affect my windows or any of the applications / files stored on my drives?

It will not affect most applications, but there is a possibility. Drivers are often written to work with certain processors/boards. You might have to update some of your drivers.
It's probably not going to be smooth or pretty, but it should all be possible. Make sure your power supply can handle the processor and board requirements as well.

I'm not so concerned with any application bugs as I was in need of a fresh XP install anyways. As long as the chipset has no bearing on any of the data saved on the HD's I'm cool. I would hate to lose some of the music or videos I have on there. I will unplug all the others but I'm running XP on a 10gb partition. The remaining 85 gigs or so are all data that I would not like to lose. Thanks for the Power Supply tip. That didn't occur to me. Also, my power supply is about 6-7 yrs old. The fan is installed directly in the box and makes a great deal of noise. I should replace it anyways.

The data stored on the hard drive will not be affected one bit by installing a new CPU or motherboard. In fact, you could just go out and buy a whole new computer, and just take your old hard drive and stick it in the new computer and all the data would be right there.