|The SMART error message was generated through the bios and almost certainliy means a physical problem with the drive that's not fixable.|
The HP_RECOVERY was in a second partition on your hard drive. Windows was running from the C: partition and the recovery was on a D: partition but they were both on the same physical hard drive--unless the original configuration was changed. So if the hard drive is going bad then both the C: and D: partitions are affected.
When you say you '. . .downloaded windows to my D: Drive. . .' does that mean you did a fresh install on the D: partition or just copied some stuff over to it? Is XP still running from the original C: partition?