I have a similar problem, after trying to install Mandrake 8.0 on my Thinkpad laptop and finding that there was an issue with the Trackpoint. I got the 8.1 release and got past the old issue and now it says that partioning failed. I am trying to keep my Win98 system on the HD and have a dual boot system. The HDD is a 6.4 gig and I have almost 3 gig free that I want to put Linux on. I ran a defrag on the HD in Windows, couldn't get Scandisk to complete because of too many restarts. I figured that was because some proggies were running but after shutting two down I couldn't find anymore to stop.
Not sure what to try next maybe a new HD???