Disk utility will not let me mount new hard drive

Macbook Pro 10.6.3

I believe someone spilled water on the computer. After letting it sit for a day I turned it on and saw a gray screen with a folder and question mark.

I tried reinstalling the OS using the optical drive but the HD did not show up in disk utility.

I replaced the HD with a new one and it showed up on the disk utility.

I selected the HD on the left side of the panel, selected 1 partition for the volume scheme, extended journal for format, entered a name and selected apply.

However I received a couple different error messages:

POSIX cannot allocate memory

POSIX input/output error

I read a couple of posts stating the ribbon could be damaged, is this possible if the HD shows up in the Disk Utility?

Also I ran the hardware test and found nothing. Is it worth running the extended test?

Any suggestions? Is the logic board destroyed?