@Radical,
if you're still fighting with this HDD, I suggest you download MHDD (
http://hddguru.com/content/en/software/2005.10.02-MHDD/), and you can then determine if the drive is gone or not. Although MHDD has a "zeroing" command, I recommend using a bootable Linux CD (ex: Knoppix) as it'll usually enable (U)DMA and you can zero the drive much faster:
dd if=/dev/zero of=/dev/hdX bs=16k
Where "hdX" is the ide drive number (0-3).
Alternatively you can use a Mac and Disk Util to zero the drive.
Then try again to use it in WinUAE.
Good luck!