Installation error

So I bought this new computer, an AMD Phenom II X4 925 Quad-core processor running at 2.8Ghz, 4Gigs of DDR3, 1.5Tb HDD and an ATI Radeon HD5670 (1024Mb GDDR5) graphics card.
Now, Windows 7 was pre installed, but I prefere Linux and so I decided to install Ubuntu. I burnt a CD, but it didn't work, so I put the ISO file on a USB-stick and ran it from there. (I used that official programme from the Ubuntu site, I can't recall its name, in case you are wondering) I installed Ubuntu 9.10, but afterwards I found out I accidentily installed it onto my external hard drive. So, I rebooted the system and tried to install it onto my internal 1.5Tb HDD. This did not work.

This issue I have is with partitioning. No matter how hard I tried, I could not get that HDD partitioned. I could erase everything, but I still need Windows for school, so that's not an option. I tried to mannually select a partition, which works with my external HDD, but NOT with my internal HDD.
This is what I did: I selected the partition that was used for Windows (as I have done many times before installing, among others, Ubuntu and Linux Mint) and made that partition smaller. It was 1.3Tb at first, and I resized it to 1Tb, leaving 300 gigs for Ubuntu (I thought). This created FREE SPACE onto my HDD. When I did this with my previous computer, it just said 'FREE SPACE". When I do this with my external hard drive, the same happens. With my internal HDD, however, that "FREE SPACE" is categorised as "unusable". The only difference between my internal and external HDD's (which are both Western Digitals, by the way), is that my internal HDD runs at 5400RPM and my external at 7200RPM. I might be mistaken, but I don't think that could be the problem.

So basically, the only way to install Ubuntu is to completely erase everything from my internal HDD, or use a part of my external HDD, which I do not want to do.
Is there any way I can solve this? Can I change some settings in Windows (which I am using atm) that could resolve this?

Thanks in advance,
Wim.