PC crashed, looking for feedback

I'm posting from my wife's laptop because my desktop is screwed.

I started having problems with it while playing CoX. At first I thougt it was a memory problem because I kept crashing on the loading screens. Then I started crashing at random places. Finally my PC wouldn't boot up windows.

I bought 2 gigs and stuck them in and did a recovery. I took a few hours to set up, install, and remove programs to my liking. I restarted the PC tons nd had no problems. I tried to start up my PC this morning and it wouldn't load up windows.

I ran a memory test and it was fine. I ran a test on the hard drive and it failed 2 of the tests.

I'm assuming that my hard drive is corrupt or broken.

Here's the tricky part:

My desktop is a Compaq. It has a seperate small hard drive devoted as a partition, which holds all of the softare and drivers for a fresh install or recovery. My fear is that if I buy a new hard drive and then install windows xp from the partition that it will corrupt my new hard drive.

My PC is Vista ready, but I never bought Vista. Since the partition installs tons of compaq and AOL related crap that takes forever to remove, I'm thinking about just getting Vista, removing the partition, putting in a new hard drive and starting from scratch.

I meet all of the hardware requirements. I'm not sure if my vid card supports direct x 10 though. It's an Nvidia 7600 GS.

So if I put a new hard drive in, do you think that will fix it?

Should I remove the partition?

Has Vista been patched enough to work like it's supposed to without giving me a headache?

Any help would be greatly appreciated. Thanks in advance for any and all help or insight.