I have some trouble trying to install Windows 95 on an old Seagate ST3120A drive (106 MB size). The computer of this installation is an old Am386DX old school PC. Before this I installed Windows 95 on a 640 MB Quantum hard drive under my Celeron host PC and it worked fine, but the 386 PC was unable to boot from the hard drive (too big).
The problem appears when Windows 95 copies its files to the hard drive. It appears to get stuck around 75-85% and it throws some random errors, like divide by zero or vcache errors.
Every time I try to install Windows, the setup formats the hard drive successfully.
Celeron host PC specs:
Intel Celeron D 2.4GHz
256 MB RAM
ATI Radeon AGP video card
CD-ROM drive
I tried the following:
Changed CD-ROM
Changed Windows 95 installation CD
Unfortunately after I zero filled the drive with 2 passes, it revealed 34 errors. Then I tested it with HDD Tune and found 2 bad sectors.

The bad sectors look like they are at the 55 MB position. Maybe that's why the installation is frozen.
Can I still use the hard drive to install Windows 95?