Restoring Factory Defaults of course it doesnt work. HELP

I noticed my laptop was running a little slow. So instead of going through the trouble of running virus scans and malware scans I decided to restore it to the factory defaults. But when im restorn it gets to about 79% and gives me an error saying Error Code=1117 (The request could not be performed because of an I/O device error. Now the best part about this is it less then 20% of completing the installation of the factory default settings. So I restart the computer and it looks like it will load into windows. It says setting up my desktop for the first time all that asks me to enter in a username and password I created. Basically its like restore to factory default settings appeared to work. But then it says loading desktop enviroment and it just hangs there for hours and hours. So basically I just cant get into my desktop enviroment. I have an acer ASPIRE 5732Z with windows 7 64 bit on it. So I figured whatever Ill just reinstall with a windows xp cd instead because now a days they dont usually give you the OS on a cd ne more that comes with the PC. So I go to install XP it looks like it will install and I get a blue screen of death saying that if this is the first time ive seen this error to scan for viruses. I really dont know what to do and quite im frankly im pissed off. I have hirens boot cd and booted into minixp and tried installing xp from there. But it says I cant because I only have service pack 1 on the minixp. Any suggestions?

 

I also tried setting windows xp pro up from mini xp and it just completes the set up in 2 minutes or less. So it obviously isnt working. But the error I get when trying to install it from boot up is this. Its a blue screen and it says the following. A problem has been detected and windows has been shut down to prevent damage to your computer. If this is the first time youve seen this stop error screen restart your computer. If this screen appears again follow these steps. Check for viruses on your computer. remove any newly installed hard drives or hard drive controllers. Check your hard drive to make sure it is properly configured and terminated. Run CHKDSK /F to check for hard drive corruption and then restart your computer.

Technical information

***STOP: 0x0000007B (0xF78D2524,0C0000034, 0x00000000, 0x00000000)

 

I think I might of fixed it. Changed some things around in my bios. Ill get back to you guys if I have ne trouble.