As usual dlanor explains something far better then I ever could. I did mention the drive not writing data to the platters, though not how or why this would cause the issues at hand. dlanor has a gift.
Sorry to hear the HDD is probably dead, though. I just lost two 100 GB HDDs in a raid 0 last month. Plus my 320GB "storage" HDD last week.
SCPH-39001 V7 GH-019, fliptop case, FMCB 1.8, 80GB HDD (SMS console) 16MB card running it all
SCPH-39001 V7 GH-022 FMCB 1.8, 120GB HDD (Game console) 64MB card running it all