Once you've tested HD and wiped it to proceed, try Recovery Disks. What exactly happens?
What is the licensed version on COA sticker, as you may need to clean reinstall with Windows 7 Installation DVD which is always a much superior install anyway: Reinstalling Windows 7
Another option is to order Recovery Disks from Acer. If machine is less than a year old you still also have their Tech Support on it, which is pretty abysmal but could net you free Recov disks and even possibly a solution if this is a known issue with the model and they have it at the top of their script.