keep it on master, as its not sharing IDE channel, so should wok with both slave and master setting.
anyway, the problem lies with your Caddy's drivers, they might havent been installed correctly, try changing the USB ports.
Intel Core2Quad 2.66Ghz 12MB L2-Cache
4096MB DDR Kingston Hyper-X
XFX 9600GT AlphaDog
Seagate 2 X 320GB SATA2
LG L246WH Flatron 24"