Hard drive problems - can anyone help?

I have been having problems with my Inspiron 1525 laptop for quite awhile, and I fear that my hard drive is bad. I'm wondering if anyone can confirm/deny this and help me determine how to handle the situation.

Quite often, I see blue screens on my laptop. I don't have all of the errors written down, but they have not all been the same. The latest one was "kernel_stack_inpage_error". Unfortunately, I did not write down the error codes. I sometimes see the blue screen happen, but it  happens other times as well for my machine has often rebooted itself (which is what happens after the blue screen). My IE also hangs very often (I don't know that this has anything to do with the problem but I'll mention it). It will just chug away indefinitely and is then difficult to stop (I can stop it from task manager usually). I also sometimes get a MS Visual C++ Runtime Library error when using IE, which shuts it down.

When I ran diagnostics on my hard drive, many bad sectors were found. I don't know how many because it prompted me so many times asking me if I wanted to skip that bad sector, that I got sick of it and cancelled it. So I'm thinking there are a whole bunch of them. Defrag runs weekly and seems to do ok (I don't know how to tell if it helped or not). When I scan for and attempt to repair bad sectors (Computer->Properties->Tools->Error Checking - while Windows is running), it runs for awhile and reads a bunch of free sectors and then it hangs with no CPU activity and the mouse won't move and nothing else works. I have to hard boot. When I run chkdsk /f /r at bootup, it hangs in step 5 of 5 with no CPU activity.  I ran both of these tools more than once with the same results.

First question, is there any hope for my hard drive?

Second question, if I replace my hard drive, do I have to buy a new copy of Windows since the copy I have came installed on my laptop? I have been told (now) that I should have ordered the Windows CD at an extra cost for just such a situation, but I was not aware of that option when I bought the laptop. I have all the CDs that came with the laptop (including the ones for MS Office which I'm hoping I can install - right?).  I'm hoping I can reinstall all the apps that came on my laptop even if I do have to buy another copy of Windows.

Third question, once I get everything running with the new hard drive, do you think the old hard drive could be formatted and somehow used?

Machine info:

Dell Inspiron 1525 laptop, Intel Core 2 Duo CPU T5450 @1.66 GHz, 2G RAM, 32-bit OS

Windows Vista Home Premium, SP1, IE 7.0.6001

C drive Samsung HM250JI , NTFS, 250GB (156 GB free)

Please let me know if any other information is needed. Thanks in advance for any assistance.