I consider myself fairly Tech savvy person and have worked on many computers. This one has me stumped though. My friend has a Dell Inspiron M5030 that had a hard drive fail one month after the year of warranty was up (go figure). I agreed to help her install a new hard drive and reinstall the system. I picked a new 320GB western digital scorpio blue at a local store, install it in the laptop, and run the dell factory recovery from the two restore DVDs she created. Everything was going smoothly, I went through the windows welcome setup and booted into windows 7. A box then pops up saying that windows installed a new device and needs to restart. This is where the nightmare began.

Right after the POST, Windows Boot Manger throws an error:

Windows has failed to start. A recent hardware or software change might be the cause.

Status: 0xc000000e

Info: The boot selection failed because a required device is inaccessible.

What I have tried:

1. Tried a second time with the exact same results
2. There are no other device plugged in.
3. After doing the factory restore, I downloaded and installed all the latest drivers and bios updates before rebooting ... same error.
4. I read a thread talking about this problem being caused by AHCI problems and played with the BIOS setting changing it from AHCI to ATA before and after running the factory restore. (The system would not boot with the bios set to ATA)
5. Booted from Hiren's boot reformated the drive clean with one NTFS partition and ran surface tests before running factory recovery ... no change
6. Pushed F12 and ran Dell diagnostics. Everything in the Pre-boot Assessment passed. I opted not to run the extended memory test. I press any key to diagnostic partition, but get an error saying:

 "remove disks or other media. Press any key to restart"

I verify that there is nothing in the optical drive or any of the USB ports and push any key. The system then gives two loud beeps and says:

"Reboot and select proper Boot device or Insert Boot Media in the selected Boot Device and press a key"

I push a key and the screen goes completely blue with the exception of a message down in the bottom left that says:

"Running MATS Test. Pure call!"

I push control-alt-del to reboot and nothing is solved.

Conclusions:

1. I am doing something wrong? (could be likely)
2. Something is possibly wrong with the recovery media? (I have requested windows 7 CD's from dell, but I'm not sure if I will get them as it is out of warranty.)
3. Something is wrong with hard drive? (not likely as it is brand new, installs fine initially and passes all tests)
4. The hard drive is not compatible with the system? (again not likely because the models are virtually identical)
5. A virus attacked the system and is not being stored on the hard drive?
6. Some other strange phenomenon is causing the system to believe that an external device is attached?

Aside from trying to get Windows 7 media from Dell, I am lost for what to try next. Any advice or help is greatly appreciated.