Hrm.. well, like mentioned before:
Try the hdd on a different motherboard, update the BIOS, check the drivers, and only run a low level format on an IDE or EIDE if the hdd has failed miserably. If you know what DLLs that is isn't installing, try to copy those from a different computer and then put them on the hdd. It is a hardware class so make sure no one changed the jumpers and make sure you have the right cables and that they're properly hooked up. There may be a problem with the read/write heads but i dont think that's it cause from what you say it all works fine untill it's time to install the drivers. May want to go to www.driversguide.com or the hardware's website and download the updated version of all the hardware drivers. Good luck.