Does the second/new drive show up in the control panel? Can you click on files on that drive and open them. Have you ran the add new hardware wizard, if not do so. Did you take the second drive from another computer where it was the only drive, and if so does it have jumpers and did you set that drive to the slave position, or are both drives set to cable select?
One way to format that drive would be to insert it as the only drive in your computer and then boot into your XP CD and when you get to the "welcome to setup" screen press F10
You will then be at the Recovery Console.
at the prompt type
format /q
then when done
exit
Again you will then reinsert this as the slave drive and run the hardware detect from the control panel and then check the disk management and see if you can again format it from there.
Heres a link on the recovery console
http://support.microsoft.com/kb/314058/EN-US
You can also force format that sucker by installing it alone in your box then going through the set up and when prompted to use or create a partition to set up on just delete and create a new partition using all the space and then doing a quick format then shutting down and yanking when format is done-don't let setup lay any files on that drive.
Heres a page with some formatting info/step-by -step
http://www.bootdisk.com/
Hope this makes sense, and there are other ways but I would give the RC a try first.