For all who care, I figured it out.
I have a new vid card that I installed on the mobo in the process of building the machine. ATI Raedon all-in-wonder 9800 Pro. Anyway, there's a cooling fan on it, and there was a wire hitting the center part of the fan and slowing it down. The card would overheat because it was getting too hot - the fan wasn't spinning fast enough. That's why the SATA drive wouldn't format, and all kinds of odd stuff would happen during install. As soon as I fixed that, everything was great!
I highly recommend the 10,000 RPM SATA drives. Screaming fast.