It sounds like the disk driver on the hard drive is too new. This has happened to me on occasion.

Here's what I do sometimes:

If you can boot up from a floppy, and then carefully plug in the data cable (you should plug the power cord in before you turn the machine on), you should then be able to format it using the patched Apple HD SC Setup 7.3.5. The reason this works, I think, is because with the drive disconnected at start up, the computer doesn't try loading the defective/incompatible driver.

Good luck!

c