I assume that, in your BIOS when you set the controller to enable SATA and treat it as IDE, the BIOS indicates that it recognizes the drive and shows some reasonable parameters and a correct size.
Have you partitioned and formatted the drive? Every new drive needs those two operations done before it can be recognized and used by Windows. You mention the drivers that came with the drive, so I assume you have a software CD. It should have an installation utility to do these jobs.
Partitioning is the first step. IF you have SP1 or SP2 as part of your Win XP, then you can handle HDD's of any reasonable size. You have the choice of making one large partition on the HDD, or two or more smaller ones. BUT if you have only the original XP with no Service Pack, it will only allow HDD volumes to be up to 137GB (actually appears to be about 125GB once it's all done and reported by Win XP). Then you will be forced to make several partitions, each treated by Windows as separate drives with their own names.
Once a partion (or more than one) is created on the drive, then you must format each one to create the blank file system on it. I'll warn you that Windows takes a VERY long time to do this because it does a careful check of everything as it works. The drive maker's utility disk proably uses a simpler "quick format" that can do the job in a couple of minutes per partition.
You may be able to do all this, instead, using Win XP's tools. Do Start ... Settings ... Control Panel ... Administration Tools ... Computer Management ... Disk Management. It will show you all your drives, including a display of a blank box indicating a disk drive not ready to use and undefined. Right-click on it and look for a tools to create a partition (you can specify the size), then another step to format it. If you made your first partition smaller than the whole drive, go back and make another in the remaining space, then format it. Once these are done, if you right-click on the useable drive, one option available is to change its name if you want to control the way all your drives are labelled.
Oops, I forgot one little detail to check. I don't know if your mobo's controllers support SATA II, or only the original SATA. Many new HDD's come with a small jumper installed on pins on the back to limit it to work on original SATA controllers. If that is what your controller does, look for the jumper and labelling near it. But if you have a newer SATA II controller you can remove the jumper and make the HDD perform as a true SATA II. The only snag that can come up is if you have a plain original SATA controller and your HDD does NOT have the limiting jumper installed. Then controller and HDD don't talk well.