There's nothing wrong with low-level formatting a drive, unless you don't want to lose the data on that drive (in which case, why are you formatting to begin with?

).
The biggest problem with the SX-1 is that the standard cd32 power supply does not provide enough power. This is why I would suggest using a notebook harddrive, as they are not as power hungry as the standard ones. To trouble shoot the power problem, remove any extras on the cd32 and SX-1. This includes fast RAM, floppy drive, and headphones, as they all eat up power. When you boot the machine, wait a few moments and hit the reset button, or set the jumper on the SX-1 to wait a few seconds after boot (so the harddrive can spin up). You should be able to find a PDF of the SX-1 manual online easily.
The disk that came with the SX-1 is just a utilities disk; nothing really special.