format a wd12000beve to replace hp dv1000 hdd

I need a little help as to what size allocation unit i should use. I formatted it in ntfs but when i tried to load windows 7 it say that basically it wouldn't work in that format. So i pulled it back out of laptop have it hooked up to my laptop and when i goto format it I have too option NTFS of exfat which I'm assuming means fat 32 it the ask what size allocation unit size so basically am I on the right track with the format in exfat and if so what size allocation unit should it be. The hdd is going in a hp dv1000 and will be running windows 7 thanks

 

Let the windows installer do the formating, ntfs is the preferred file system for windows seven.