Issues with replacing the internal hard drive in a mid 2007 macbook
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.