|When I get that sort of error with an (internal) HDD, I generally give up and smash it (reason explained later on).|
My preferred smashing routine includes taking the lid off, putting it on an AT power supply, spinning it up and taking assorted hand tools to the platters. Afterwards, drilling holes is not uncommon also.
Why destroy it?
Data can ALWAYS be recovered from a hard drive as long as it physically is not damaged too much. If the platters inside still exist, the data on them still exists.
That said, this will not help you if you are hoping to exchange it on warranty. The sad truth is though, there is nothing you can do to eliminate your data which will not void the warranty, UNLESS someone is able to advise you how to get the drive working again (I don't know how, but it's probably possible...though again, warranty voiding could be an issue).