I purchased a PS2 HDD off ebay and the DRM won't let me play Final Fantasy XI nor install Final Fantasy XI since the Hard Drive I guess was for another console. I know the PS2 HDD Utility Disc exists, but It's rather expensive to buy and I don't think it can be burned to where it works on a soft modded PS2, at least I don't know how. Is there anyway I can get my HDD formatted correctly without the official utility disc?
When connected to the PS2 and the PS2 is switched on, does the HDD OSD start? If it does, then try to delete the old FFXI installation with it. Formatting the HDD without the HDD Utility Disc will cause the HDD browser to be lost too. If you either don't need it, or it never worked for you and you have nothing to lose, then you could try using uLaunchELF to format the HDD.
IIRC this tool formats the hd in the ps2 filesystem format but you'll still need to install ps2 os I guess..
If you have issues, use HDLoader and it will format the hard disk for you. Winhiip had issues with Windows 7.
If you are using a legit console, with a legit HDD and you want to play Final Fantasy XI, you need to ignore all what people said on this thread and use this disc: (USA HDD Utility disc) Which should have came with the HDD. That disc will wipe all the data including the DRM data and ready the HDD for binding with a new PS2. There's no way to reuse whatever is installed currently on it with another PS2 and that's why you're getting DNAS-404 (HDD binding) errors. If your PS2 is Japanese you would want this one instead: (JPN HDD Utility disc. Red sleeve. Legit PSBBN discs with blue sleeve would do too but PSBBN sucks.) P.S.: You can't run the utility disc with softmod but you can put a copy of the disc which matches the region of your console on a modded PS2, have it format and erase the HDD then move it to your PS2. While it's cumbersome it will work for you as the binding is done by the PlayOnline viewer install disc, not by the utility disc.
Additionally to what SP193 said, formatting the HDD with 3rd party garbage will make the system partitions non conforming with SONY standard (they will miss data and structures required by retail games for operation) and they will be not "locked with password" as they're supposed to be. That alone will cause you trouble.
You've said this a couple of times, but what is this "data and structures"? The uLaunchELF format process goes through the APA driver (by libhdd), so whatever that is missing is simply just not installed. Then there will only be problems with opening the system partitions, which games are not supposed to be opening. The HDD OSD isn't affected because its APA driver does not support passwords, much like the homebrew APA driver.
Special stuff is put on the __net partition at raw sectors. Also it needs to be locked with a password (homebrew doesn't create it properly). DNAS rely on that stuff. Also, files are put on the __sysconf partition for the ATOK stuff (fonts and dictionaries) which HDD based games will likely require. Additionally the directory structures on __sysconf is not created. Games will access both __sysconf and __content partitions freely. Homebrew does not create the HDD properly. People don't notice mostly because they don't use SONY stuff when they format that way. Of course people only care about having a ton of space for loading their pirated games ... lol
I think that you mean DNAS-protected games, instead of retail games in general? Other than __sysconf, __content wasn't even documented under the normal SCE SDK and __net was documented as being a reserved partition, so normal (Non-DNAS) game developers wouldn't access them. ATOK is used, only if the game supports it. Even __sysconf might not be accessed because it only contains system configuration files, but it doesn't include the basic system settings which are obtained from the EE kernel instead. Unless the game needs something from that partition, it won't be accessed either. Anyway, it shouldn't be password-protected if games could access it, otherwise the APA driver would deny access. Retail games that support the HDD could also include those that simply perform a data installation to the HDD unit, not just those PSBBN/DNAS-protected content. Homebrew software can't distribute the SCE files because of copyright issues, and neither are they required for use by homebrew. If SCE software has to be used, then the user probably already got a SCPH-20401 and a suitable HDD utility disc to manage the HDD unit.
OP were very specific on the intent of playing PlayOnline/Final Fantasy XI on their HDD. Which happens to be the only HDD DNAS protected game still active.