please don't laugh...

gregrocker said:

How about Surface Scan?

Is there any chance you tried install to Logical partition? Because that is the first cause of this error.

You've tried partitioning and formatting using Win7 DVD resulting in error, then partitioning, formatting and marking Active with PW resulting in same error, correct?
Yes

I am running Surface Scan right now.

To run Disk Check from booted DVD, first repartition, format, assign drive letter.

Boot DVD, press shift F10 to open a Command Line, type:
DISKPART
SELECT DISK 0
CLEAN
CREATE PARTITION PRIMARY
FORMAT FS=NTFS
ASSIGN letter=C
EXIT (only exits Diskpart)
CHKDSK C: /f
EXIT

Then select Install Now to try install to C partition.

It looks like Gateway has taken down GWScan which is the Data Lifeguard version I have used for years on all makes and models of HD"s. I can put it up briefly for you to download to burn to CD as it may work better than Data Lifeguard, which gets regular complaints.

When you run .exe file (as Admin) it will unzip to C:Cabs where you can browse to the ISO file to burn to CD with ImgBurn at 4x speed. Let me know when you get it done as I need to take down this file.
I have downloaded the file and currently burning it. Also, I am also at the format fs=ntfs step. It's crawling along at 31%.

You are moving right along. Anything found on the PW surface scan?

It would be disturbing if GWScan doesn't see the HD.

GWscan should autostart to a DOS screen with 3 choices: type in 1 to Run GWScan, press Enter. On next screen, use down arrow to select Extended Scan. After scan completes, arrow down to Exit, then restart computer into DVD to try install again.

DocBrown said:

It's a 320gb HD, so it will go slow formatting to 100%

Doesn't the full format include chkdsk, but only quarantines bad sectors?

If so, it should still be a good idea to run chkdsk /f.

It came out all green for the surface scan. And I'm at 41% now...

Ok, to clarify, I am doing these steps:
Boot DVD, press shift F10 to open a Command Line, type:
DISKPART
SELECT DISK 0
CLEAN
CREATE PARTITION PRIMARY
FORMAT FS=NTFS
ASSIGN letter=C
EXIT (only exits Diskpart)
CHKDSK C: /f
EXIT

Then I'm going to boot with the GWScan disc

Then I'm attempting to install via Windows DVD on C:

Good.

If all that fails, then I'd complete testing hardware by running memtest86 CD for 5-6 passes. Memtest86 - Download Page

Then you can either Google the error text and number and read more in depth to try to get to a fix, or run the Vista Recovery disk, Update BIOS, try install from Vista - even an in-place Upgrade as a last resort.

Others may have more ideas. I will call in some heavier artillery.