You need to replace the failed hard drive, and then reload everything.

I have exactly the same problem, 

Did you manage to fix the problem?

I disagree with your answer.  If it was a failling hard drive why would I be able to still be able to access everything under windows with an external monitor?  When a hard drive crashes is doesn't work, mine functions.  What part of the functional hard drive would still make it fail?

This just happened to me two days ago.  I spent a day trying to fix it and then called Dell, and they're sending out a new HD.  Laptop isn't even three months old.

My question is, since I have to send back the original HD because of warranty considerations, should I be concerned about any sensitive data (like bank account numbers, top secret code I'm developing) being extracted from the old HD?

If you can still access the drive, you can wipe it clean with a utility such as

http://www.dban.org/

If you cannot, and are concerned about the data, DO NOT have Dell replace the drive - buy your own replacement.  Dell will charge you significantly more than the real replacement cost if you don't return the faulty drive, but they do require a return in case of warranty replacement, unless you purchased the "keep  your drive" option with the system (this is only as I recall, an option on business systems such as Latitude, OptiPlex and Precision).

There is no point in installing Windows - no, using a wipe utility won't void anything (just don't open the drive case itself, which WOULD void the warranty).  They simply need the drive back when you receive the replacement.

Gotcha, thanks again for the help!

Thanks for the suggestions, ejn63.  The only way I can access the drive is to reinstall Windows.  The repair function didn't work at all.  If I reformat the drive or wipe it clean with another utility, will it invalidate my warranty?

If you don't have much on your laptop or you have an external storage device try restoring to factory settings, mine works perfectly now & theres no costs,