How do I format a (non-formatted) drive when the menu options in the Disk Utility are greyed out? So I tried installing Lion on an old (white) Macbook, but first I wiped by my drive clean. Just to find out that I only had 1GB memory and Lion requires 2GB.

Now the drive is clean, with no filesystem (I think), and it won't even allow me to install Snow Leopard.

Keeps saying 'Can't install OS X' on this computer - that happens after I boot to the install Disc and choose English.

I am assuming it is because the drive is not formatted for an OS X friendly filesystem....but the Disk Utility option is greyed out. 

How do I fix this?
You need to format/partition the drive as a MacOSX Journal Extended first then you will be able to install Snow Leopard.