How to boot with new internal hard drive?

I just installed a new hard drive in my 2006 Macbook Pro 15" dual core 2.33. The other drive died and I had a flashing folder with a question mark in it. I do have a backup however it was not a current backup. I tried to boot the laptop using the most recent backup which was sometime in 2011 that I have on an external drive and I got the flashing folder with a question mark again! I then attached another drive that had a backup from 2006 on it and this time it got to the Apple screen but it stalled. It keeps flashing from the Apple logo and a circle with a slanted line through it (/) I call it the "Ghostbusters" sign. Not sure what that means.

I powered up my Laptop while holding down the Option key and my hard drive popped up on the screen however when I selected the drive it went back to the flashing folder.

Do I need to install the Mac OS X install disc that came with my laptop? I can't remember what OS X was on the MBP when I bought it but the last OS X on the machine before the hard drive failure was Leopard. That probably won't work either if I can't even get in to format the new hard drive right? Normally I try to stay up to date with the latest OS X but I am still using Final Cut Pro 7 for video editing and I wasn't sure how much further I could go using FCP7 with newer OS.

Before I installed the drive, I took my machine to the Apple Store and had them look at it with the old drive still in there. They did some kind of tests and it showed my computer was not recognizing the hard drive and they recommended that I get a new drive installed. Now I have it installed, I am not getting past the grey Apple screen.

Thoughts?