Windows XP crashing on startup

I just finished re-formatting my harddrive from the Windows XP disk. It all worked fine, untill I found the WLAN drivers didn't install, so I downloaded and installed them and SP2 from another computer ( this one ). All was working fine until I installed IE 8, and restarted my computer. Upon restart, there was nothing on the desktop, and a error message - Windows Explorer has encountered an error and needs to close. I tried Ctrl-Alt-Del and it worked, but it soon had an error - after 5 - 10 seconds. Trying to run a program via task manager only resulted in another error. I tried system recovery - it freezes. I tried booting from last known safe point, and the same thing happened. I tried booting from safe mode, and it loads the start bar, but any program freezes.

The computer is now over 6 years old, and I have been using it constantly for demanding games for it's specs ( 1 gb RAM, 2GHz proccesor ) and I think the hard drive might finally have died.

Does anyone know how I can check this without running a program, as I think it is impossible and I should just buy a new computer ?:cry