HD SC Setup by default is a pain in the ass to work with. It only detects early apple certified drives depending on the version and will fail a disk on any hiccups. The first thing you could try is disabling the drive whitelist using resedit, or trying a patched version of Apple's Drive Setup (again, there's a disk whitelist you gotta disable) which is a lot more forgiving about potential issues.
The flashing question mark is simply the machine not seeing a useable system folder, but I've seen it do that on boxes that didn't have theirs "blessed" properly.