You probably did not set the file system type correctly. Both the file that is added to the Add/Update dialogue and the partition must have the same type. Also the file system type is unique in the system so you must not mix it up with those used on other hard drives. The same is true for partition names (e.g. DH0). You must not use the same name for different partitions, even on different drives on different controllers. You also must not use the name of a volume or drive (e.g. Work or DF0) for the partition.
Another reason could be that there is some garbage on the disk. Just start the Format program directly (from Workbench:System) and choose your partition from the list.
Bye,
Thomas