Installing OS X 10.7 on new HDD from DVD
Hard drives or DVDs that do not have a filesystem on them will not show up on startup with the option key held down. So, the HDD won't show up on startup because you don't have Mac OS X installed on it yet.

1) Restart with the the option key held down. If there is a system disk connected to the Mac it will show up on the screen. In this case, the install DVD should show up.

2) Select the install DVD and push the return key.

3) Try to install Mac OS X from the DVD to the HDD by following the installer instructions.

4) If the install fails, your install disk may be damaged. Post your error message back here.