When I Hook up my 296 gig hard drive My xbox sees it and gives me the option to format it. After going through all of its steps it remains a media only device. I have looked everywhere and cant find an answer.
I know this isn't the answer you were expecting, but maybe consider contacting Microsoft? Even if it's not be anywhere on the internet, they've more than likely been contacted about this.
I'll do more searching and see if I can find a solution.