i trust you are using the install disk with HDtoolbox?
you will need to "install" the compactflash disk first. This writes a Rigid Disk Block - RDB, with the layout information, numbers of heads, number of sectors, block size etc to the base block on the CF card so the amiga knows how to access it. the "read disk config" button should be able to do this for you.
once this is done, then you can partition the card as normal.
or you can make up the numbers, just so long as they add up to 4Gb. i used 512byte block, with 16 heads, and kept upping the number of sectors/cylinders untill the disk size looked about right. don't go over 4Gb though. even if you loose 100Mb of disk capacity, its still worth it not to trash your data when the machine tries to write to an area of disk that doesn't exist.
i have 4GB Sandisk ultra2 and ultra3's on SCSI to IDE bridges to work in A500 GVP HD8+ and A530 add-ons, working fine,
and i have three Maplins no-name-brand 4GB "Speedy" compact flash cards working in two A1200's and one A600
none of my machines have less than OS3.1, and the 3.1install disk worked fine.
where abouts is your machine getting stuck?