What is wrong with my acer laptop?

I dont know much about computers so I need your help. This is an aspire 3680 which is less than two years old. A couple of days ago it just wouldnt boot up past the acer logo. Eventually i found where it said operating system could not be found. I do not have a back up dvd for vista so i used a backup for xp from my dell computer. After i installed xp everything would boot up fine but windows is really slow and doesnt work well. At first i could get on the internet and it would work ok but it keeps getting worse and now i cant do anything on it. Why is this pos so messed up? Could it be a bad hard drive? When i did a disk check many segments came back as unreadable, whatever that means. I only paid like $400 new for this thing so i dont want to spend alot to get it fixed. Thanks for the advice!!