Software cant damage any hardware
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It is possible some hardware has gone bad. But you need to find out first.
Have you ran a bad sector check on the drive yet? It will take a while but it will tell you if you have any bad sectors on the drive.
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Also blue screens can easily be cause by bad memory. You can also run a memory check on the system. Microsoft has a free one you can use, burn the iso to a cd, boot off the cd and run the tester.
http://oca.microsoft.com/en/windiag.asp1 am for me, I am off to bed. Let me know how those tests turn out.
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Shane