As I mentioned, you need to use Disk Utility from the installation disc and format it "Mac OS Extended" (aka HFS+). You cannot install Mac OS X on a drive formatted NTFS, FAT32, or anything else that's not HFS+. If it can see the drive in Disk Utility, then have Disk Utility format the drive appropriately. Once that's done, you should be able to install OS X on this hard drive in your PowerBook G4.