Hi Phonic
As you'll probably already know, the HDD light will remain on if one of your partitions is invalidated - the OS will attempt to repair the damage to your filesystem.
It may well be that your system recognises that a new IDE device is fitted (check in HDToolBox), but the fact that OS3.0 doesn't have CD ROM support as standard may be causing a problem - I suspect your OS is trying to interrogate the CD ROM and possibly reorganise it, not knowing that it's a read only device (RW not withstanding - that will require an additional driver).
You could try and get hold of an IDE CD ROM utility on the Aminet or upgrade your OS to 3.1
