After successfully installing RouterOS to a Pentium II with a 40GB IDE Seagate drive, when I reboot I get the following error message(and subsequent system hang):

Kernel Panic: VFS: Unable to mount Root FS on 01:00

I'm using RouterOS V2.9.38

Do I need to partition and format the drive manually?

The install partitions the disk, you can try either removing some network cards etc or use Netinstall and choose different options

I tried using netinstall to prepare the disk. Netinstall completed fine, but when I put the HD in the machine it's not recognized as a bootable drive.