Some one had posted a solution so I am writing the same here
The problem with this RAID controller is that the aacraid driver that is shipped with FC3 is broken, causing the installer to crash/freeze. After several days, heres the work around:
1) Go to adaptec website and download the latest drivers. The one that worked for me was "Linux Installation Driver Diskette and Driver CD Images v2400" located http://www.adaptec.com/worldwide/support/driverdetail.jsp?sess=no&language=English+US&cat=/Product/AAR-2810SA&filekey=aacraid-driverdisks-1.1.5-2400.tgz
2) Using a linux environment, extract the files and use "dd" to create a driver floppy.
dd if=aacraid-driverdisk-x86_64-FC.img of=/dev/fd0 bs=1440k
3) Boot to FC3 install disk 1 and at the command prompt use "linux dd" to load the driver
linux dd ANY_OTHER_OPTIONS
4) Select the driver source which is floppy fd0. Insert the driver disk when prompted.
5) FC3 will continue successfully to the end!
Adaptec also provides drivers for other linux distros like Suse, RHEL, and CentOS so this method might work for those as well.
Hope this will save someone some time and frustration. Good luck!
BTW FC4 installs fine without a driver disk. I just couldn't configure other things to work correctly on it and had to revert to FC3