[dnanian]

You need to select the drive in Disk Utility. Then, switch to the Partition tab. Click "Options". Then choose "GUID" (if an Intel Mac) or "Apple Partition Map" (if a Power PC Mac).

Once done, partition the drive.

Once that's done, add the drive into the Spotlight Preference Pane's "Privacy" tab (it should work after the partition), then try the copy again.

Note: I don't know if the Macally case uses an Oxford chipset, so it's hard for me to know whether it will be reliably bootable. We'll see.