the problem is dd from a big to a small drive

fdisk/mkfs/mount (to /mnt) new drive in old system. copy all over. for i in proc dev sys; do mount -obind /$i /mnt/$i; done; chroot /mnt

now you are in a chroot envrionment of your new drive.

fix /etc/fstab, install grub to the new device, done.

i think. if you have seperate /boot, care for that, too :D