Thanks for your reply.
Although it wasn't a SATA 3 drive, it got me thinking about the BIOS.
I flashed the BIOS with the latest (Dec 2011) version using the built-in utility. The utility can see the .bin file if it's placed in the root directory of the USB flash drive.
After the BIOS flash, the installation was able to proceed.
I suspect it's something to do with the AHCI setting, although the GUI for the new BIOS version does not have any AHCI options.
Either way: Problem solved and thank you!