MacBook Pro hard disk failure. How to recover and clean install? I have a MacBook pro, 2009, 13 inch, Original Snow leopard OS.

Recently, I was experiencing that my MacBook some times froze or restarted automatically! I didn't care, and one day it did not start!

When booting, it does not proceed the first gray page, and circle keeps rotating, until after few minutes the circle changes to a NO Entry sign.

I used Opt key while starting the MacBook and booted into Bootcamp. It works fine, I have been using Bootcamp windows for 2-3 weeks now, and just twice I got the Blue Death Screen, out of sudden!
I got the opportunity to back up all my files.

I used Opt-Cmd-P-R combination and reset the NVRAM.
Also I pressed the D key while starting and made a Apple Hardware Test. The result was recognition of the following problem: 
4HDD/11/40000004:SATA(0,0)


Can some one please let me know what my problem is?
If my hard disk is busted, how comes it works (almost) problem-less in bootcamp?
Can the problem somehow be solved? For example if it is a bad sector on my hard disk, by isolating that area or so? 
I tried to boot from MacBook DVDs and try to clean install the OS again, but when I restart and press and hold C key, (while the OSX DVD which came by my laptop is inserted), nothing happens! I hear the noise that it tries to read the DVD, and that's it...it just goes on for ages and nothing happens (stuck to gray initial boot page).
How can I have a clean installation of my OSX?
Does my computer (Snow Leopard, MacBook Pro mid 2009), have a recovery hidden partition? How can I access that?


Your helpful comments are highly appreciated.

Thanks.
I'm sorry to tell you that your hard drive is dead (or at least is on the way out), and will need to be replaced. If you're not too confident, you can call Apple Care who should be able to recommend a local shop who can sell you a replacement hard drive and install it for you.

Alternatively, it's quite easy to replace the hard drive yourself. If you google it you'll see there's loads of articles and videos on how to do it (here's a good one to get you started). Apple even has instructions on how to change the hard drive in the macbook pro manual, which is definitely worth a read before you crack it open.