I am confused as well, and likely my misunderstanding getting everything started.
I thought this was a secondary drive he was having issues with and was attempting to format from within a running Windows. .
im confused and tired ;-/
When you start the Windows 7 disk, and boot from the CD..
exactly what happens?
Can you choose Custom install etc?
if the bios is listing the HD, then Win Setup should see it as well at that point, regardless of if its partitioned, formatted or whatever.