I didn't read much into it, but i believe the 120GB stand-alone drive comes with this kit. From looking at this page it looks like it
is indeed possible to transfer from a 20GB Pro HDD 360 to a new Elite HDD; although i don't believe this was MS's plan since they don't include the kit with the Elite (i don't think).
I'm planning on getting an Elite soon and was wondering the same thing if i was going from a Pro to an Elite. AFAIK, this kit is the only way to transfer existing data on a 20GB drive to a 120GB (60GB?) HDD. I would go about contacting XBOX to see if they still give them out--they might charge. You can probably also find them on eBay--since the average user can only use it once.
This is XBOX's Data Migration page, and
this is a hands-on by engadget.