I wonder if the BIOS uses a small EIDE partition on the HD (like some Compaqs do). If it doesn't see that partition you get no farther? Can you look at the original HD with some disk tools on another machine to see what the partition structure is? Most of the ones I've seen are pretty small (perhaps 20MB max).

edit: Also, can you use disk copying utility (ghost, Maxblast or the like) with the two laptop drives hooked to a desktop machine? Then you could create or extend the root partition (as you desire) w/Partition Magic or the like. Can you 'see' the new drive (ie it shows up w/the correct size) from the BIOS setup screens? That at least would tell you if it's a BIOS limitation or not. If BIOS 'sees' the new drive, try to clone the original onto the new drive and take it from there.

-Zeke