Cable select should fix it.
I know thats what Apple recommends all hard disks be set to. Give that a try. Worked for me on my iMac 350.
I was having that issue yesterday too. The 10gb drive in my G3 iMac died, so I whipped it out and stuck an 80gig in there instead.
Couldn't get it to see the drive though, figured it out in the end, cable select mode to format the HDD, Master mode to install it onto...