Can't Install Win2k8 On KVM - Classic 0x80070013 error

I am trying to install Win2k8 Std as a KVM guest on Debian Squeeze.

As you can see from these screen shots;

1. No drives are detected (I have blanked out a 20GB image for testing) - screenshot1
2. I am using this driver CD: - screenshot2
3. I have signed the Win7 driver (I assume this was the most appropriate one?) - screenshot3
4. I can now see an unpartitioned drive - screenshot4
5. But I can't create a new partition on here, getting the error code 0x80070013 - screenshot5

I have had this error code before but only on a physical server. If I remember correctly it was complaining because the disks were partitioned as GPT (because it was a server that was being re-purposed) so repartitioning with an MS-DOS table fixed that. This is a blank disk image though. What is wrong here, and how can I correct this?

Thank you.

UPDATE

I have booted the VM with a Gparted-Live disk and formatted this volume with an MS-DOS partitioning scheme, and a single 20GB NTFS file system. Now when I boot the Win2k8 CD, load my drivers, I get a different error. As you can see at the bottom of screenshot6

"Windows cannot be installed on this hard drive space. Windows must be installed to a partition formatted as NTFS".

Clicking format produces the error (0x80004005) on the screen, so I think this is still a driver issue because Windows can see the drive but not interact with it properly. Is that insane thinking?

That (VERY UNHELPFUL) error means you forgot to put the Windows install disk back in.