Update.
After pulling the Hitachi 2GM Microdrive that I was using as my boot disk and replacing it with another identical unit, I was able to have it recognized by HDToolBox, partition it, format it, and install OS3.1 successfully. My Sandisk SD 2.0GB is also recognized!
Conclusions:
It appears SOMETHING WEIRD is going on with my original Hitachi 2GB boot microdrive that precluded the system from recognizing the 2GB SD card!
I may try to recover the original microdrive at a later date, but for now, everything is working fine so onward to installing the 2386SX bridgeboard and getting that working with the SD card as the boot drive!
Details to follow, I'm sure!