Here's an experiment. Partition the drive and install
windows on an 8 gig (or smaller) partition.
If the problem goes away, you'll know that it
is a size issue and not a hardware problem.

You said that you're only running this drive
and a cdrom, so I presume that you have
each on its own cable, so it's not a cable

I found some more info:

All of the major hard drive manufacturers provide utility software that can accomplish the necessary LBA translations for very large hard drives. However, not all of these software solutions work with the Windows protected mode driver (ESDI_506.pdr). In some cases, the software drivers work only in real mode. This will reduce the speed of data transfer to and from the hard drive.

See the article here.

It sounds as though the "compatibility driver" mentioned in your
error message is the "real mode driver" spoken of in this
article. That would explain why it doesn't see the long file names.

Your drive is too big.