You're in luck mate, i had the same problem before and this method works flawlessly:

For Windows 2000 and XP:
Right click on My Computer.
Choose Manage (This will open the Computer Management window).
Go to the Storage category and select Disk Management
Right click the new drive (usually listed as Hard Disk 1) and "initialize"
You now have the option to partition and format the drive.
The default settings of Primary Partition and NTFS- Quick Format are recommended for most users.
But can use Fat32 to use it with PS3

Please tell me the result...cheers

if your HDD undetectable you need to reformat with disk management. create partition.
normal format is NTFS, you need to reformat it into FAT32, ( apparently no larger then 32gb)
once its reformatted to FAT32 , ps3 will read your external HDD

thats what i did for mine for back up saves files in ps3.

hahaha.. so u cant do anything about it? what did u do with your HDD Then? LOL cant you return it to the place where u bought before? lol

Actually your windows XP will not detect the ps3 HDD because it in a Sony proprietary format. Windows XP only reads NTFS and FAT32. To format it you will need to use some Hard Disk management software like Norton Partition Magic or Acronis Disk Director.

320gb rm270.. i say how many times di. yet people wanna ask. geez..

and the 7200rpm doesnt matter.. its already proven.. the original article i dunno where i read di.. 

That is correct and that is why you need a3rd party software like partition magic to see other disk management utilities. I had the same problem untill i used partition magic and then reformatted it.

okey...i took it as a positive way...im not emo to all forummers..it just the way u make a statement...if u dont like the way i post , just private msg me...talk nicely...and i would notice it...no need to make a cheapo statement so people here would say...haaa...what a nice buddy...good example of forummers...well after this if u dont like it just ignore it...i dont know u , and u dont know me..and im glad so glad didnt know u..cheers !

1st : Connect the controller using the usb cable and then press the PS button

(after pressing the PS button)

2nd : the system software cannot run correctly.press the ps button to restart the system

        if the system cannot be restarted , the system partition of the hard disk must be reformatted and you must reinstall the system software
        Insert storage media that contains update of a version 2.42 or later (in my case 2.52 or later)[I] , then press the start and select button
        at the same time.

        For information on how to obtain update data , refer to the website of your region.

but sadly i went to sg wang, they hav sell already the PS3 with 160 gb..MALAYSIA edition with only rm1899 .. haih..

I have a Question.
Can RE5, SF4 and Demon's Souls save data transfer to new upgraded HDD? back up utility work with these protected game saves?

Just upgraded mine to 320GB yesterday (WD 2.5" SATA 320GB 5400RPM 8MB)

Tips:

1. Make sure you have an external HDD ready (formatted in FAT32)
2. Prepare proper screwdrivers (sharper the better). Those screws are machine-tight!
3. Prepare the latest PS3 firmware file (PS3UPDAT.PUP) because you'll need it for the first installation. Put it into a USB thumb drive or external HDD. Again, must be FAT32!
4. Backup using the Data Backup utility to the external HDD.
5. Replace the HDD
6. After replacing, plug in the USB disk or HDD that contains the firmware and press SELECT+START
7. Then, hold START for 5 seconds to confirm formatting the new drive.
8. Run the data restore utility to restore all the settings, game data, game saves (some games cannot be backed-up) that you have backed-up earlier.
9. Done. Enjoy your gaming on the new HDD.
10. If you have any games downloaded from the Playstation Network, you need to reactivate them again. (No need to redownload and install). Go to your Download History under the Account Management settings in your PSN menu, select the game that you have downloaded earlier, press DOWNLOAD. You will see the screen which says "Activating, please wait...". Once this is done, the download screen will pop up. In this step, you can just skip it because all you want to do is to activate the game. If you don't activate the game after restoring them from the backup drive, you will receive an error saying that the "Copy-protection information is invalid"

I've said it before and I'll say it again, 7200rpm drives won't hurt the PS3 or the drive itself.
Even so, theoritically 7200rpm drives are hotter and obviously spins faster as well, and common sense would tell you that means it'll also fail faster.

In real-life conditions, that's not the way it is.
There are many other considerations to take note of. Like how the HDD is built, how many platter design, how the actuator head parks... and so on.

But all that said and done, 7200rpm drives are quite a bit more expensive than their 5400rpm counterparts.
So it definitely isn't worth the extra money for a mere 2-5 seconds of loading time decreament (considering the game installs data on the HDD that is).