If I understood your terse sequence of events there, you installed your hard drive from your Classic II into your Color Classic and then the Color Classic booted from its internal hard drive, where it had refused before? Is that correct?
If that is correct, I would guess that your original hard drive's jumpers were configured improperly, probably in the termination department. Improperly configured SCSI bus can cause the machine to hang at the gray screen or prevent a hard drive from being recognized. The second hard drive probably has termination set on it and that fixed (for loose values of "fix") your SCSI problem enough to boot from the internal hard drive.
Let us know if my description above fits your facts and if it does then we can go from there on advice for setting the jumpers (or resistor packs) on your Color Classic's internal drive.