MacBook – How to repair a MacBook Pro 2007 hard drive bus

You're not the first person to have problems with this drive in a Mac - see http://www.mac-forums.com/forums/apple-notebooks/217444-macbook-pro-hard-drive-replacement-wont-format.html

It's possible there is a compatibility issue, as you seem to be doing all the right things (and it is connected properly otherwise you wouldn't see it in Disk Utility at all).

The damaged hard drive bracket would not be the cause of the error above.

Try a non-AV drive (one designed for notebooks rather then surveillance/home theatre use) and see if that makes a difference.

I'd say this is almost certainly a hardware issue. Likely something internal to the drive (if it sounds like it spins up normally, probably some part of the onboard electronics), the hard drive cable or the SATA controller on the logic board.

I'd advise taking it in to an Apple store if you can (especially if it's under warranty), but if you want to try it yourself, the first thing to do is try a different drive, and see if that gets recognized. If it does, your drive is dead, if not, it's a problem with the logic board or the cable. You can get replacement parts from iFixit, but if it's the logic board, then you're better off getting a quote from Apple for a replacement.