How to create "firmware partition" on HDD?
You must have an EFI partition (aka firmware partition) on an internal drive for the installer to accept that. You have not provided the model of your iMac, so that might be an issue. Basically, if you have one of the older iMacs, you could replace the hard drive with an SSD. 256 GB SSD are pretty cheap, have a little room for stuff and are nice and fast.