The 'SUR'i issue seem to appear when there are disk SURface problems (disk format issues), happened to me too, just re-format the floppy disk again and the message will go away. You can format it in the SD-35 itself (initialize it) or in a PC.
Contrary to what I read above YES you can use HD drives in the SD-35, I do it all the time, just need to cover the bottom right hole with a sticker, format it at 720K and Voila!.