"BOOTMGR MISSING" ....What?

Hi guys and gals, Im hoping you can help me solve this headache of an issue Ive got going on. First I will let you know my goal; to have an OS such as windows XP or higher installed on my hard drive for my TOSHIBA SATELLITE A205 laptop.

Some specs-
-Toshiba Satellite A205 (Serial number and product key in tact)
-Windows Vista originally installed.
- 73 G Hard drive

So heres the problem. My sister gave me her old laptop and I would like to use it for storage of pictures, movies, etc, at home but its cluttered with alot of useless programs and runs real slow. I tried cleaning off the the computer as best as I could but it didnt help much. so I decided I would go ahead and format the hard drive. When I tried to do so the "format" command in the diolog box it was unclickable and had that distinct grey hue which indicated I couldnt click on it. I fooled around with the help feature a bit but the computer was running really slow and the help wasnt very much help lol. SO decided I would just stick the hard drive in an enclosure and format it form my other notebook. (MSI U160)
So when I got into my hard drive folder on the MSI notebook I clicked format and it worked, seemingly. It showed that I had a 73G hard drive with 72.9 available. I was wondering what this little bit left occupying the HD is (anyone know?) So I pop it out of the enclosure and and back into the TOSHIBA. What popped up was the familiar black curser screen with some text which is rather unfamiliar to me that said "BOOTMGR missing".
So I figured that maybe I should try booting it from my old WINDOWS 98 disc and install that and see if I could just upgrde the computer to a more superior OS later. I went into BIOS and tried booting from CD drive and still got "BOOTMGR missing". Now Im stuck! I new in my gut in couldnt be that easy to pop an HD out format it and then just pop it back in the computer.. There has to be a step Im missing. I guess that was foolish on my part. Anyway my questions are
When you format an HD does the original OS stay on it? If not what type of info could possible be in that one megabyte lingering on there?
Does this sound like an easy problem to fix? Should I even bother or should I just use the HD as an external hard drive. This is becoming a real headache and I could not find any info pertaining to my exact problem on the web.

Thanks in advance!