thank you for your replies.
I was able to solve my problem last night.
I hooked the new (empty, invisible) hard drive up to a running Windows 7 on a different computer - temporarily unplugged the DVD drive, plugged that 'invisible' harddrive onto the (now free) SATA cable for the DVD drive.
Then I used Windows 7's Disk Management to format the entire 80GB as one NTFS partition.
After that my test restore from image worked like a charm.
What did we learn from this:
you still need a computer to fix a computer