First lets delete the "Test" volume and expand the Windows volume to recover the "Unallocated" space and run check disk.
I would expand the Windows volume in small steps, say 40GB, then run check disk, expand by another 40GB and run check disk.
Then Expand to reclame the remaining unallocated space and run check disk one last time.
If check disk reports no errors then we know for certain the bad block issue is fixed.
As to reinstalling Windows 7, you can but you may need to activate by phone:
How to activate Windows 7 manually
- Click Start, and in the Search box type: slui.exe 4
- Next press the 'ENTER' key
- Select your 'Country' from the list.
- Choose the 'Phone Activation' option.
- Stay on the phone and wait for a person to help you with activation.
Also:
How to Activate Windows 7 by Phone
http://support.microsoft.com/default.aspx/kb/950929/en=us
http://www.sevenforums.com/tutorials/18715-activate-windows-7-phone.html
Microsoft Activation Centers Worldwide Telephone Numbers:
http://www.microsoft.com/licensing/existing-customers/activation-centers.aspx
Windows Activation Technologies Update for Windows 7 -Update for Microsoft Windows (KB971033)
http://windowsteamblog.com/blogs/genuinewindows/archive/2010/02/11/windows-activation-technologies-update-for-windows-7.aspx
JS
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