OS/2's fdisk has problems working on your hard drive because you have not updated the device drivers that handle your hard disk.Download the latest file IDEDASD.EXE from IBM's device driver site. Place the file in a temporary directory and, at a command prompt, type the name of the file and it will expand several compressed files as well as instructions on updating diskette number 1.
Make a copy of diskette number 1 and save the original. Working with the copy of diskette 1, replace the files ibm1s506.add, ibmidecd.flt, and os2dasd.dmd, with the newer ones that you expanded. Note that on the expanded files, you will have dasd16.dmd and dasd32.dmd. Rename dasd16.dmd to os2dasd.dmd when you replace the file in your copy of diskette 1. DO NOT use the dasd32.dmd--it is for higher versions of OS/2. Open copy of diskette 1 Config.sys in a text editor(Tedit.exe in your disk 1 copy)--DO NOT use a word processor; add the line: SET COPYFROMFLOPPY=1, at the end of the diskette 1 Config.sys and save the change.
If you do as above, your OS/2 fdisk utility will work well with your hard drive. Do not use PMagic 5.0 to partition your hard drive, I have experienced incompatibilities with OS/2's fdisk. In other words, once you update your diskette 1, you can do all your partitioning from within OS/2--hpfs and fat.
A more useful utility is Drive Image. Since you will be installing Win2k also, you may have some problems because OS/2 is already installed. You can make a FAT temporary partition, say 200 megabytes, at the end of your disk. From OS/2 command line, after you make the partition and reboot, type: FORMAT X: /FS:FAT, where x is the partition letter OS/2 assigned to your temporary partition; make an image of your OS/2 partition using Drive Image. Then if Win2k insists on removing your OS/2 partition you can allow it to do so knowing that you have an image as a backup. Afterwards you can use PqMagic to resize or move Win2k and follow with Drive Image to uncompress OS/2 at the partition where it originally was installed.
Do not forget to apply latest fixpacks and device driver updates to OS/2 BEFORE you mess with your video. Otherwise, you may have video corruption problems or no video at all.