Using Migration Assistant to restore after hard drive failure?

My MacBook's hard drive recently went kaput. The replacement arrived today and I attempted to do a TM restore when booting from the Snow Leopard disc. However, it inccorrectly states "This disk does not have enough space to restore your system." The new hard drive is exactly the same as the old one; both are 640 GB. I have researched this issue for hours and no one seems to know how to fix it, and frankly I am shocked that Apple has failed to recognize this serious problem.

So, my question is, can I use Migration Assistant with a fresh install of SL and get exactly the same results as I would if I had restored via Time Machine? Will I lose any data in the process that I would have had, had I done it via TM?

Another thing: I was messing around in the Migration Assistant window just to see how it worked. I selected everything that was available to be restored. However, it stated there was still around 150 GBs of free space on the drive. I had nowhere near that much free space on the old drive, and one would think that that would have left TM with enough space to go through with the restore. How is this sudden new, free space accounted for?