I found it interesting that another answerer suggested cable problems. If you where able to successfully complete read and write tests, the cable is fine, and so is the drive most likely.
It's to bad you had to find out the hard way the reformatting and reinstalling should be the last resort, not the fixall like to many of these wannabees on this site are always saying.
OK, off my soap box and on to fixing your box!
This is going to take some research and a little time but it's a good learning experience.
The reason you're getting the crashes trying to reinstall is there are proprietary drivers for the motherboard or some of it's hardware missing. They where on the drive, but we know what happened to them. So, if you're lucky enough to have the disks or CD's that came with the box, this will be easy. If not, you will have to get the model number of the motherboard, go to their website and download them. If the box is a Dell or Gateway or the like, you can get them off their website for the drivers.
Now, we have drivers, what's next? Here is where it get's a bit iffy. Since you are able to boot, the issue is how to get the drivers installed when the Utils don't see it. The installation of the drivers needs to happen before we can format, so the next step is to build an autoexec.bat and config.sys to handle the driver install and the format for us.
Go the bootdisk.com and download a windows98 boot disk, either to a floppy if you have one or make a bootable CD with it. Use the instructions with the drivers on how to install them. Most likely it will be a simple command line entry like" a:\>mydriver.exe /C:"
In this case, I used "a" as the drive you booted from.
Here's the bad news. If you only have recovery CD's for your OS, your screwed, you get to buy your very own copy.
Now, the drivers are loaded, insert a FULL INSTALLATION version of XP or 2K and it first will check the drive and if it isn't functioning properly will tell you it can't continue, but I'm betting you will get the option to format the drive. You should be home free from here.
If you have any questions, feel free to email me.
Good luck!