Formatted new hard drive by using installation CD. Connected external TM drive and tried to use Utility/Migration Assistant selecting TM Restore option. Tried many times but after searching for TM drives it couldn't find the drive (however the drive is recognized by other computers and is recognized by this same MBP only after OSX is installed and TM app is opened to select this external drive as a TM drive in Options). The external drive is fine and the TM files on it are fine. Are there any other tips to get it to be recognized right after first boot up from CD so that now user permissions, file permission problems will occur. Only way I can get a restore to work is to fully install OS X from the CD, use the TM app to restore.
Solved my own problem. The TM External drive is a WD that had a locking utility. Once I removed this password lock, the Installation app recognized the drive and allowed me to follow the standard restore procedures.