Do you have OS install disks, if so there should be a disk for setting up a hard drive (Disk Tools)? If the drive you have does not have an Apple ROM in it then you will need a 3rd party formatting utility to partition the drive (Silverlining is one, a hacked mac disk tools would be another), then you can use the OS install disks to install the OS on any of the <2GB partitions.

I have a LC3 with a 4.5GB HD partitioned into 3 partitions (.5gb OS, 2 x 2gb data drives).