I assume you mean when you specify the partition/hard drive to install the OS during setup right?
I've had this problem before also. What to do first, is boot with a win98 boot disk, run fdisk, and delete all primary/extended/logical drives (delete everything), then make the primary partition, and mark it active. Reboot and use the win98 boot disk again to boot your system, then format your hard disk. when it is finshed, run "fdisk /mbr" -->this clears the master boot record (removes the bootstrap code, i.e. bootmangers etc. like 2000's and XP's boot manger)..this only takes a second.
Now reboot again, with your XP Pro cd or 2000 CD and boot off the CD to begin the install. Now when you choose the partition, it should say FAT32 instead of unknown, and the install should continue all the way through.
Jason Bishop