You will run in similar trouble if you try to install from current "debian weekly build" (2010-06-07 at the very moment).
The installer refuses to format any partition. If you enter a shell and execute "cat /var/log/syslog", you will find:
...: /lib/libblkid.so.1: version `BLKID_2.17' not found (required by mkfs.ext3)
A solution would be to update package "libblkid1" from /unstable.
Unfortunately, the installer's environment neither has apt-get nor dpkg on board. But this is a short way to bypass the problem:
* Download the appropiate libblkid1-udeb-package (unstable, your CPU architecture) from
http://packages.debian.org/
* unpack it, unpack data.tar.gz too
* copy the resulting file 'libblkid.so.1.1.0' onto an USB stick
* attach it to the machine you are about to install
* From the installer's main menu, choose to open a shell
* replace the exiting link /lib/libblkid.so.1 with the new file:
mkdir /stick
mount /dev/sdXY /stick/
cp /stick/libblkid.so.1.1.0 /lib/libblkid.so.1
umount -l /stick/
exit
After this, you can directly continue with your installation at the partitioning stage.