Do you hear the drive spin up at all in the iBook? If not, then that's why it's not being seen.
I had an identical problem trying to install a WD 320 GB Scorpio Blue (blue label) drive in my old iBook G4 to replace the 120 GB WD Scorpio drive (yellow label) that I had used to replace the original 30 GB Toshiba drive that had failed. I did the same things you did--the Scorpio Blue worked in an enclosure, but would not spin up at all in the iBook.
I returned the first Scorpio Blue and got in a replacement. Same thing--the drive would not spin up in the iBook, but was fine in an enclosure. It seemed to me that the iBook was not delivering enough power to spin up the drive. I spent a lot of time talking to WD tech support on the phone, and they felt the problem was with the iBook, as you might expect. They weren't much help.
This iBook was the original iBook G4 with the 800 GHz processor. Eventually I used an older 250 GB Scorpio (yellow label) drive, and that one worked.
The 320 GB Scorpio Blue that the iBook would not spin up is working just fine in a 12" PowerBook G4.
I also was able to successfully install two 320 GB Scorpio Blue drives in two of the latest iBook G4's (mid 2005). All were bought from Tiger Direct.
Unfortunately, this probably doesn't help you much. I am convinced that my original iBook was not able to deliver enough power to spin up a Scorpio Blue drive, although it was able to spin up the older Scorpio drive and its original Toshiba drive.
According to the specs of both the drive and the iBook, the drive should have worked, but it didn't. It could well be that one or the other or both were a bit out of tolerance with respect to the power needed to spin up the drive, but I had no way to measure either one.
Unfortunately, WD seems to be about the only one manufacturing these drives any more, so what you may be forced to do is to return that drive and get a replacement, and continue to do so until you get a drive that works. After all, the Scorpio Blue did work in the later iBooks, and it may be that the individual drives vary a bit in the amount of power required to spin them up.
Sorry I don't have a better answer for you. I hope you can find a drive that will work for you.
Good luck!