Have you already tried installing the drive as is and then booting from a known bootable disc, such as the OS install disc? Once you've booted via a bootable disc, you can choose to partition the drive. At that point you would choose partitions that are smaller than the 120 GB limit. One way to ensure the disc is bootable is to mount it on the desktop and then go to system preferences/startup disc to see if the mounted disc is even an option.
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