I would first try SpinRite
http://www.grc.com/spinrite.htm
rumor has it that if it doesnt work, you can "agree to destroy your downloaded copy for a full refund"...so its worth a try.

I'm a fixit myself kind of guy...even if it costs me a few bucks...I'd rather pay $25 - $50 than ship it off and be without...but I'm weird like that.

So, another think I'd try, knowing you can always take it back, is replacing the hard drive controller card...or rather augmenting your system with a PCI-based controller. Just go to compusa and get a controller card (usually $30) and slap it in. You may have to disable the onboard controller in the BIOS (or be willing to accept some boot-time errors), but it will give you a better indication of what the problem is. I have seen quite a few onboard controllers go bad lately. Its actually been the hardware problem I've encountered the most, recently (and most recently).

If all else fails, pull a drive from a working machine (that has been backed up ) and slap it in. See if it at least tries to boot...you may not want to fully boot as it will start looking for drivers and may even trigger windows activation again...but if it boots it will tell you a lot (like the controller, wires, power supply, computer itself, etc) all work.

You might also be able to determine a lot using a linux bootable CD or DVD like Knopix or something.... just some troubleshooting thoughts.