Your hard drive might not be properly failing it's more likely that you have a bad sector which diskcheck is struggling to read. Normal error correction procedures in the hard drive failed as it can't read the sector.
If you run spinrite from
http://grc.com (Or TPB if you get what I mean) on your hard drive it'll do some fun tricks to read the sector and get the hard drive to correct itself. Although you're in warranty so if you're willing to sit around for a replacement then that's probably easier.
I doubt a windows reinstall will fix the problem, it might mask it initially but as your hard drive fills up you may find that the bad sector comes back to haunt you. Although If you're lucky the hard drive might reallocate the sector when you reinstall.