There is an md5 checksum error in the HDInstall.bat file on the MorphOS 1.4 CD included with the Pegasos-II which prevents install to HD. To correct this issue, please follow one of the following methods:
1) Use the downloadable iso
2) copy morphosboot:#? dest: all clone
3) or fix the hdinstall problems with the following script:
HERE(The page also describes how to make the script.)