Boot to the Installer/Utilities DVD, but DO NOT Install.
Answer only the "what language" question if presented, and wait a quarter minute for the MenuBar to be drawn. Choose Disk Utility from the Utilities menu or the Installer menu.
Use Disk Utility to Erase the drive again. Be sure you are getting Options GUID partition map.
Then use Disk Utility to partition the drive to one partition, Mac OS X Extended (Journaled).
Select the drive and choose Mount. It should not produce an error. Now you are good to go on the Install.