The computer restarted unexpectedly... Windows install can't proceed.

Hi. I was previously using windows 7 home premium 64 bit on my computer. The computer worked for around 2 years and one day suddenly went BSOD on me, with various problems from disk read errors to "video driver failed to initalize". After my roommate tried all the system recovery options (which all failed), he decided to use his recovery disk to do a factory reset of the computer (it's his computer). This got rid of most of the problems, with the exception of disk read errors from time to time. However, during the setup of the computer, we got the "The computer restarted unexpectedly or encountered an unpexted error. Windows installation cannot proceed." error, which just leaves us in an infinite loop (unless we get a disk read error). Windows 7 came pre-installed with the computer, so we dont have any installation discs. The only disc we have is a recovery disk that lets us get to the system recovery options. The computer was a plug-in-and-use computer meaning that we dont know much about the system specs other than the sticker that came on the side . I included it in case anyone is intrested in it.
Any help would be greatly appreciated.

SYSTEM SPECS
windows 7 home premieum 64 bit
intel core i3 processor 550
6gb DDR3 memory
1TB hard drive (dont know the name or anything)
NIVIDIA GeForce 315 1024 MB

How can i check which hard drive i have? Im not very good with computers

Is the HD seen in BIOS setup? Boot in now by tapping the key given on first screen for BIOS setup, look under Storage or HD's to see if the HD is recognized. If you can't determined which is the HD post back some camera snaps for us to help you.

If it's not listed then it may have gone bad. You don't say if this is a laptop or desktop or give it's model number so it is hard to advise changing out the HD cables, but this may be needed if it's a desktop.

You can google the serial for the HD device to find out it's maker, find the bootable diagnostics download in the links Rich provided above, burn to CD with Windows Image Burner, boot and run Extended CD scan to see if HD is functional or needs repair.

If HD is OK, I would try these steps to Clean Reinstall - Factory OEM Windows 7. Everything needed to get a perfect reinstall is included in the tutorial.

Thanks ztruker. With that .iso we figured out that the hard drive wasnt connected properly for some odd reason so we switched the cables connecting the hard drive to the motherboard. Needless to say, the installation went smoothly. I cannot thank you and gregrocker enough for the assistance you've given me. I just have one last question. After reinstalling windows, the screen resolution is stuck to 640x480. Is there anyway to fix this?

As explained in Clean Reinstall - Factory OEM Windows 7 Win7 will supply newer drivers via optional Windows Updates.

If there is no Display driver provided that offers better resolution, go to the Support Downloads webpage for the PC or Display adapter model to download and install it. A Standard VGA display driver, for example, is only meant as a place holder driver except for the oldest hardware.

Problem solved. Thanks.