Dual boot Windows 8 and Windows 7, why can't Windows 8 installation see the drives?
The solution to this problem was tracked through comments to the question itself but in case somebody stumbles upon something similar this would be the way of fixing it.
The problem with the setup program not being able to see drives or partitions may be related to it not having access to a suitable AHCI or RAID driver. Windows 8 supports some configurations but some others require a driver.
Access a Windows 7 (or Vista, or XP) system running in the machine you wish to install, through the device manager find the SATA controler (AHCI or RAID may be in its name too). For example in this particular case it was "Intel(R) Desktop/Workstation/Server Express Chipset SATA RAID Controller".
Download the drivers for your SATA or RAID controller, there'll need to be an INF file and some catalog and system files along. Copy them to a USB stick and reboot the computer booting into Windows 8 installation.
When you reach the stage where you have to select where you'd like to install it plug in the USB stick (preferably in a USB 2.0 port, but I believe Windows 8 has native support for USB 3.0 too) and load the driver from the folder containing it.
After that Windows should be able to access the drives and partitions and the installation should proceed as usual.
When the driver to access the storage system is not present by default in the installation DVD, installing from the Windows already running in the system is not recommended and may fail. The reason is that while that windows does have access to the drive, the new one wont and after rebooting it may lead to infinite reboot cycles.