In BIOS - on the main menu - select your SATA hdd. Make sure LBA Mode is set to Auto.

If your version of XP is not XP SP2 you can also have this problem. If this is the case install windows anyway. After you have installed all updates and service packs the drive should be recognised correctly but will show the remainder as unpartitioned.
You can then use a partition manager tool like Partition Magic to extend the partition.

I've tried to find a few free ones - sorry but i've only ever used ones that i have to pay for (namely acronis) so i'm really not much help here - but here's some links for free partition managers that will be able to change the partition size after you've installed all updates if you need them.

zeleps.com
Ranish Partition Manager. Hard Disk Partitioning Software. Download freeware tools and source code...

Please back if doesn't help your problem.