A failing laptop/notebook HDD or just a corrupted Vista/data?

Hello.

I am trying to figure out and fix a client's old Sony Vaio
laptop/notebook with 1 GB of RAM and 32-bit Vista Business. Basically,
it doesn't load up its desktop fully. I do see a graphical splash screen
loader and then a black desktop with a movable white mouse cursor, but
that's it. This happen in both safe mode and normal boot up.

I was able to use the laptop/notebook and access its HDD with no
problems with both KNOPPIX v6.4.3 liveCD, an updated Norton Bootable
Recovery v3 Flash USB drive (no malwares found), and a Windows PE CD. In
Windows PE CD, I ran chkdsk /f and /r on it, and it found problems like
lost clusters and bad sectors:

Chkdsk #1 with no and with /f parameters separaretly:
http://pastie.org/1481138
Chkdsk #2 with its /r parameter that took a few hours overnight:
http://pastie.org/1481142
Chkdsk #3 with no parameters: http://pastie.org/1481145

I also ran smartctl v5.40 in Windows 7 PE and got the detailed results:
http://pastie.org/1481161

I did NOT run its long test yet since it would probably take a few hours
and I can't wait for it to finish at this time. Would it help to do that
later when I do return to it to get new smartctl results?

For kicks, I rebooted back to Vista but the results were almost the same
except normal boot up now result a blue screen with IRQ_EQUAL_
something. It went too fast and autorebooted to get the details. Safe
mode still hangs.

Is this Vista trashed and need a (repair?) reinstall?

Thank you in advance.
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Sounds like a video problem.

Could simply be the video driver is corrupt,
or could be the hardware.