I have a 10GB Toshiba drive in my Powerbook 1400c without any problems. It duel boots 8.6 and 9.1 with no issue on either end. I believe the current drive was pulled from a dead Sony laptop.

I think the 40GB issue has less to do with the size and more to do with the fact it is an ATA-5 unit that I believe is not compatible with the drive controller on the Powerbook 1400. Try another drive and see if it does it as well.