All HD's fail - some will go on for years and years, others will hit
the dirt early on. Just a factor in their mechanical nature !! The
only salving grace is if it's still within warranty but that doesn't
cover data, only the bare drive.

To answer your point:

1) Repair might be possible but is only a stop gap to get the OS
loading again for backup purposes. Once that warning is given you have
an indeterminate time before total failure.

2) You can install from scratch onto a new HD in the same hardware
without any issue, apart from the time it takes of course :-) If you
do get an activation prompt it'll more than likely go through the
automatic system without a hiccup.

The easier method is to fit the new HD whilst the old one is still
functional and clone the contents to the new one using a program like
Acronis True Image, which has a 30 day free trial plus HD makers
Seagate and Western Digital have a free one for download on their wen
sites that work with their drives only. If it's a laptop then you'll
need to fit the old HD into a USB caddy to connect it for the cloning
process.

3) Usually when you start up the first time you'll be nagged into
making recovery DVD's but I've found over the years that when a user
gets to the point of needing them they've gone bad and don't work :-(

Regarding Acronis above, this can make an image of the entire HD onto
a backup drive that can be used to restore back onto the same drive or
a new one.

R> I rebooted today and got a warning from BIOS that I am facing imminent
R> hard drive failure.