I am confident that the temperature sensor is one different to the S.M.A.R.T sensor fitted in all drives.
When you replace the HDD with a non-standard HDD (ie. not one that Apple have baptised and granted permission to live inside their oh so superior machine *NOT*), the iMac doesn't use the S.M.A.R.T data, and as such reports that there IS no sensor, or atleast that it's broken, so it kicks up the fans just in case the HDD has caught fire or has been blasted into the centre of the sun... Y'know... Just in case.
The solution to this is to effectively short the connector out. This allows for a current to flow and for the iMac to be of the impression that the temperature sensor is working and at optimum temperature.
Another POTENTIAL solution that I've yet to try is to buy a temperature sensor belonging to the OPTICAL drive. It shares the same connectors as the previous HDD sensor, and it performs the same task, so I can't see it failing. However, these are difficult to source and can be a little costly, so if I take that route, I'll update...
There's also a piece of software called HDD Fan Control or similar. I wouldn't bother though - It didn't help me very much.
Here is my update - Worked a treat.
So don't panic! You can choose any HDD you like - Use the old-fashioned method of sticking a temperature sensor to it from an old optical drive. Works brilliantly.