Late reply, but were you able to figure out what the issue was? Were you just trying to interact with the wrong area of the Water Wheel model? Sometimes you have to run around a bit in order to find the area you're supposed to target to install the crafting material.
Hm. This might sound silly, but are you certain you have 50 pieces of hardwood selected and not hardwood planks, regular wood, ironwood, or anything else?