Yes. Normally when the drives are new, they are unpartitioned and seen as unallocated space. I am not sure where you found that information from; Windows 7 should be able to read hard drives fine. Both drives I take it are presumably new so they should be unallocated. The Windows installer had read the drives correctly and installed your OS to your 500GB drive.
Hope this makes sense, please let me know if you are confused on anything!