You should try to reformat your hard drive.
When you've booted from the OS X DVD, go to Utilities in the top menu bar and open Disk Utility. Click on your new 320GB hard drive on the left side, then click on the tab "Partition." Change the drop-box, which says "Current" to "1 Partition" and then re-title the partition to "Macintosh HD." Then, click on the "Options" button at the bottom of the window, choose "GUID Partition" and then click "Okay." Then click "Partition" in the bottom right and let it do it's thing.
After that's done, quit Disk Utility and proceed with the OS X installation. It may work. Sometimes things like this happen. I've experienced it so many times.
I hope that works! Good luck!