Why won't it recognize a 1 TB drive?

Hello i am working on a Macbook A1181 13" White Laptop.

I tried two of the same drives and still my 1 tb Western Digital 9.5mm drives and both were brand new. Held down C and tried to install OS X on it and no drive showed up then ran Disk Utility and it showed as a 7.3 Tb drive. Tried to Erase got the Disk Erase Failed ... Input/Output Error. then tried to partition and got the same error.

I am a repair tech but cant figure this one out.

500 gb is the biggest drive i can get to work properly but he is full and needs a bigger drive.

Has anyone figured this out cuz it's not a bad drive and it seems like a drive limit issue.