It seems that I have discovered the answer to my own question.
When booting into the SRE, one must head right into Disk Map tab, right click on the unallocated space, and set the partition size there.
A reboot later, and we are in business.
We had the USB HDD with the images on it on and taking a drive letter, C:, while trying to do the restore. We had it off during the boot specific to creating the new partition. Would the USB HDD taking C: be a problem?
Anyway, for now we know that we are not able to create the partition from within the Restore Wizard. Why? Not too sure about that one yet.
Philip