At the Partition tab, select Volume Scheme, and choose something else from the drop down (such as 2 partitions) Don't choose anything else, and click the Partition button. When that completes, choose the Erase tab, and enter the name you want to use. Mac OS Extended (journaled) is the normal choice, and is the default for a good reason. Mac OS standard will leave you with enormous file sizes, and a limit of 32,768 files, more or less). The OS X typically installs something more than 90,000 files, so cannot use the Standard. The other choices are for special uses, such as Unix support drives, or multi-platform use with Windows, and mostly should not be tried as an OSX boot drive. It either won't work, or you can experience problems with various kinds of software. In other words, change the default format if you have to, otherwise leave at Mac OS Extended (journaled)
The OS 9 drivers are needed in the event you will ever use the drive booting to OS 9. They don't affect anything else, and can safely be installed at the time of format. You cannot add the OS 9 drivers at a later time without re-formatting the drive completely.
Partition - erase, and then install should work (but your CD drive still may be interfering)
Some 'purists' may respond that you don't need to partition, and then erase, too. I prefer this way, especially if you are using a hard drive that came from a Windows system.