If you are using an OS below XP SP1 it will not recognize a HD above 137 GB. Only XP sp1+ can do that for you.
This is how I fixed my issue:
I am assuming your BIOS can see it like mine did. I had to borrow a friends SP1 upgrade disk and format the partition with that. You get to a point where the installation process is halted because it was just the upgrade CD and not the full. I then plugged in my XP full install CD and complete installation without a hitch. Now I have a functioning 350gb HD instead of a 131gb.
Hope his helps you.

