Hmm, I’m having the exact same problem. I have used boot camp assistant to restore my HDD before, but this time the “windows” HDD remains on my desktop! I think it’s because my windows has A bad spyware virus (which is the reason I am deleting the partition!) I have done this before flawlessly, and I am sure it’s because of the viruses on windows, not because of my macbook pro. try this:
Open boot camp assistant,
click “start the windows installer”. From here, try “restoring” windows using an xp cd. completly format the partition windows is installed on. This is a long process , but I think it will work!