Since this is an IDE drive, have you set its jumpers correctly?
It seems you are saying this is the only HDD in your system. So ideally it should have a 4-pin Molex power connector from the PSU plugged into its back edge, plus a wide 40-pin connector on the end of a ribbon cable plugged in. It should be the END (Black) connector of that cable into the HDD; the Blue connector on the other end goes to the mobo port. And that should be the FIRST IDE port (IDE0) if your mobo has two. Then check the label on the HDD for how to set a jumper on pins between the power and data connectors. Set it to be the Master. (This is important - any IDE port MUST have a Master device.) I am assuming there is no other IDE device, so the middle (Grey) connector will not be plugged into anything.
Boot into BIOS Setup and check that the IDE port is Enabled and the HDD detected with the right size. You indicate that it is seen there. If you have NO SATA devices, you might consider Disabling the SATA ports for now.
Some of your story is puzzling, so let's clear that up before proceeding. You say you tried running FDISK, and you tried to Format the new drive. How? If you do not have a working hard drive with an OS in the system, did you boot from a floppy disk with an older DOS on it? By the way, when you Format a disk and it asks "Volume Label:" it is NOT asking you to enter some special label you have to find. Every disk has a Volume Label and usually you enter whatever you like (up to 11 characters), like "RingoDisk"; if you don't, it will assign its own "name" as a mixture of characters.
If you are trying to Install Vista from an optical disk, you do NOT need to Partition or Format that HDD before starting. The Install Disk will do those steps for you.
Which brings up the optical drive. Where is it? That is, is it another IDE device on the same IDE port / cable, or on another IDE port? Or, is it a SATA device?
Either way you will place the Vista Install disk in the optical drive. You boot into BIOS Setup and look for where you set the Boot Priority Sequence. Set it to use the optical drive first, and your new HDD second, and nothing else. Save and Exit (usually the F10 key) to save the setting and reboot. It should boot from the Install disk in the optical drive and find the HDD as an empty drive unit it can use. Does that work? If yes, you probably can proceed with your installation.
Let us know what happens.