2010 27" iMac with "damaged" hard drive

Trying to reinstall this machine but keep getting the error "Mountain Lion can not be installed on this machine as drive xxxxxx is damaged and can't be repaired."

Yet when I boot into an alternate OS and use both Disk Utility and Disk Warrior on it it says the drive is viable and healthy.

How should I begin trouble shooting this? Can a 2010 model drive be replaced with an off the shelf drive without the fans tearing off to 100% or do they have to use Apple 'brands'?

Yeah I have. I even opened her up and swapped the drive for another one, same result.

Alright, turns out this machine had Yosemite on it at some point but arrived on my desk with a new drive in it.

Yosemite is currently installing fine so I'm chalking this up to a firmware issue preventing older OS's from installing.

Pity. Yosemite doesn't allow the software I need to run on it. Oh well.