Hey Doron,
The failure ID that you are getting means that the hard drive is failing. I would first suggest backing up any important files, documents, or pictures to an external drive/site as quickly as possible. I have included the document 'How to Back Up Your Files (Windows Vista or XP)'.
Now I would like to confirm some information with you. When you did run the Hardware Diagnostics Test, did you run the tests on battery power only, or with the power cord plugged in? If you run the tests on battery power only, and then on battery with the power cord plugged in, do you get the same results?
I would also suggest taking a look at the following document 'Hard Drive Failure Errors: Imminent Failure, Smart, BIOHD, HD535, etc'. Please follow the steps listed in the document up to replacing the hard drive.
Looking forward to your reply! :)