as you have a SMART warning
you really need to swap out the HDD PDQ
THEN a clean install of XP Home using the COA key from PC itself
then you will have a nice little PC ready to go again
Im on the PhoenixBIOS setup utility right now trying to figure things out a bit and learn some stuff I didn't know before.

I have to physically remove and install a new HDD or will wiping the old one clean and starting over work?