If someone brought me the a computer and described the issues as Bob described his I would immediately say Hard Disk Failure. The diagnosis tool then gives the same result. Good enough for me.
Jeff, I fix computers for a living. First of all, fans fail more frequently than hard drives. If it's a fan in the power supply, it will likely overheat and produce inconsistent voltages- which will wreak havoc on everything, including disk writes. Between hardware and software failure, though, software is king- by a wide margin. For the 15 years I've been doing this, I've seen probably 30 machines incapacitated by software to every one brought down by a hard drive failure. Not to mention, the drives I have seen fail mostly failed in the first three years. If a drive survives more than 3 years, the odds seem to improve that they'll last considerably longer. On the other hand, 5 years, the age of Bob's machine, tends to be the sweet spot for software troubles. No matter what steps you take, over time, machines get more and more cluttered with garbage. When it's a child's machine, this tends to happen much faster, but, for an adult, 5 years seems to be when software related trouble starts happening.
You can't get to the option screen that Bob is seeing without reading the hard drive, so we know, for certain, that the hard drive is functioning- to a point. Smart errors, as I've said, are worthless. I've worked with drives with certain smart errors for decades. We know, from the thread that I posted, that HP builds computers, that, out of the box, come with the code Bob is seeing. I'm not saying that this isn't a HD issue, but to jump to that conclusion based upon a known completely faulty error code is premature, imo.
Everything that I've recommended to Bob is time consuming, but involves little to no expenditure. A blank cd is not that costly. If Bob buys a new hard drive online, it'll be $50, but if he goes to Best Buy or Staples, it will probably be north of $80. $80 is too much to spend when two 50 cent blank CDs and about an hour will, at a minimum, tell him whats wrong, and possibly even repair the issue. Bob has always struck me as a DIY kind of guy. I'm just trying to save him some scratch. I also offered to call Bob and troubleshoot things over the phone- gratis, so in no way am I attempting to sell him my services.