Wallstreet: Can't install Mac OS X 10.2 because of Hard Drive

When I go to install Mac OS X, it says that the computer cannot start-up from this disk. With Mac OS 9 it would. I don't have any other Mac OS CD-ROMs, and I reformated the Hard Drive to see if that would fix it. no luck. I need this fixed!
HELP!

On a wallstreet OSX must be installed on a partition
lying wholly in the first 8GB of the drive.
My PowerBook only have a 4Gb Hard Drive. In the installer it shows an hdd and a red octagon with a "!" in it.

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