Can't find hard-drive for MacBook

Does the computer boot up with the system discs? If so, go to utilities from the menu, and format (erase) from there.

I am sure that you did it properly but lets run through it again.

1. Macbook is powered down.

2. Insert the install dvd #1 into the slot loading drive as far as you can.

3. Power on the Macbook and immediately press and hold the "c -key" until the Macbook boots into the dvd and you get the screen to select language.

4. If it does not work then power off and try again, as it may not have recognized the dvd from the initial insertion.

Booting from a USB drive will not necessarily help getting the drive installed. If you have a USB or fireiwre encloser to put the new drive in...well then that may be beneficial.

You can take the new drive out of the Macbook and put in into the enclosure, then boot form the USB drive that you have with OSX, or boot from the installer DVD.

Either of these methods will alow you to (hopefully) see the new disk that is in the enclosure and you can properly format it with OSX Extended (Journaled) using GUID Partition table.

Just to clarify, you've opened Disk Utility (I meant to say that in my last post instead of "utilities") and don't see the drive there?

You have to go to the Tools menu in the installer and select Disk Utility. Then partition the disk for booting (single partition, options GUID).

Is it possible that you inserted the disk with the plastic retraction tab covering the electrical pins?
I have seen someone here say it happened to them. I would explain why it is not found.
So please remove the drive (again) and be sure that the plastic feeds correctly.
-Ken