Hello James,
larger disks (> 36 GB) should work fine. You might even use one of these 143 GB drives that cost a multiple of what the Ultra 30 is worth.
Reseat the harddisk, then use probe-scsi-all at the ok-prompt. Is the harddisk detected ?
Probably your drive was previously used with another operating system and therefore contains partition information (label) that Solaris doesn't like.
Unfortunately your description is very vague. When did the problem appear (during booting from the first harddisk, when this drive was inserted in the second bay OR when invoking format after booting from CD) ? Maybe the drive is damaged and interfers with the other devices on the SCSI bus (first harddisk, CD-drive).
In the first case install this harddisk (temporarily) in the first bay (the original one removed) and boot from CD (into single-user mode with verbose display). If the boot fails, the harddisk is bad.
In the second case it might help if you remove the partition information when installed in the previous system (PC).
Happy New Year !
Michael