Ok, so a while back my old 6gb HD decided to die randomly one day - given, it had prompted a few SMART errors previously. I tried to fix it, but decided it was a lost cause and i'd have to get a new hard drive.

Now, i got a new 40gb hard drive from a friend, which worked, and stuck it in. Registered it with the BIOS, and tried to boot. The old hard drive chugged on the XP loading bar, then flashed a blue screen and restarted - this one doesn't, it just goes to black screen after the bios loads and does nothing...

I put in a Windows 98 SE CD to either a) install it over XP, or b) reformat it...both came up with "98 cannot be installed due to the hard drive having illegal partitions" - the hard drive doesn't have partitions, and neither does my old HD, which it did the same thing with.

So is it actually the HD or could it be the motherboard / something else? Or if it is the hard-drive, what do i do?

The system; K7 GX (Something) Motherboard, AMD 1.2ghz Processor, GeForce 2, standard stuff...so what do i do?

It is possible that Windows 98 is not recognising the partitions because they would have been formatted with NTFS. (WinXP)
So the best thing to do would be to boot off a Windows XP cd or boot disk and delete the partition. (you can do this from the windows xp cd)
Once you have deleted the partition, boot off the Windows 98 CD and you should be able to create a new partition on the hard drive and carry on through the setup.

let me know what happens?
You can get boot disks from www.bootdisk.com

It doesn't do anything with a windows XP cd in the drive, it just brings up the "how would you like to start your broken PC?" kinda screen...i'm thinking now it could be the BIOS that's corrupt? is that a possibility? or are the symptoms not bad enough?

I don't think it is the BIOS that is the problem, it will either be the Hard-drive or IDE controller on the motherboard.
Do you have any other PC's there that are running Windows XP, if you do then plug the 40Gig drive into the machine and make sure it is set to slave. Boot the machine normally and then when you get into windows go into control panel, administrative tools, computer management.
Within there click on disk management on then click on your 40gig drive, right click on it and say delete partition.
Also you say that the 40Gig drives just hangs after the bios, could you try tapping the F8 key to see whether it will bring up a Start Menu. If it does try go into safe mode

Yeah i tried the safe mode, it runs the list of drivers it's starting then gets to AGP440.sys and freezes....

I know the HD is fine and is set correctly as it came from a friends computer the day before.

Alright that fine. So it sounds like the machine has recognised the hard drive, which is great. The only problem might be that because you have put it into another machine it needs to re-detect everything from scratch and this can sometimes cause problems.
I think the best thing to do would be to try and format the machine and then either install Win98 or WinXP from the beginning.

Lets try boot off the WinXP CD and delete the partition. You said last time that it asks you "how would you like to start your broken PC?"
Put the XP cd into the drive, make sure that your bios is setup to boot of the CD first.
Once it passes the bios screen it will say "..press any key to boot from CD" so press a key now.
It should now boot into the Windows XP setup screen. You should get the following options:
To set up Windows XP now, press ENTER
To repair a Windows XP installation using Recovery Console, press R

You will want to press ENTER at this screen.
Then it says something to the effect of:
Windows has found a previos installation e.t.c
To continue setting up a new copy press ESC
So press ESC.
You should then be at the Partition screen.
You want to delete the partition that is installed, I think you press D and then L from memory but just read what it says.