Cannot load Windows XP onto 100% of Seagate 500gb HDD

Problem:
When I tried to load Windows XP onto 100% of my Seagate 500gb hdd, the system would crash and I would get a 'Error loading operating system'. When I loaded Windows XP onto a 200gb partition, the system worked fine and I could work through windows and perform normal tasks.

Stats:
Asus A8N32-Sli Deluxe
AMD 64 3500
2gb of OCZ Platinum (2 x 1GB) 184-Pin DDR SDRAM DDR 400 (PC 3200)
LITE-ON Black 2MB Cache SATA DVD Burner
Seagate Barracuda 7200.11 ST3500320AS 500GB 7200 RPM 32MB Cache SATA 3.0Gb/s Hard Drive
nVidia GeForce 8800 GTS 320MB graphics card
ATI 650 combo tv tuner

Tests and updates Performed:
Updated the bios to 1405.----successful
Ran the Microsoft Windows Memory Diagnostic from DOS. Ran test with one and two sticks----both successful
Ran SeaTools (SeaGate Hard Drive diagnostic tool)----The very first test I performed is called the short test. It failed. Then ran the Long test. The system crashed the first time I tried the long test, but when I finally got deep enough into the test at about 65-70% completion. The diag recorded bad sectors up to 100 then asked me to repair. I did and then SeaTools passed the drive. I ran the short test again and the drive passed. Ran the long test again and after a couple crashes hit the 100 bad sector limit and repaired. Seems like a pattern that would take far too long to complete. Sectors are getting repaired, but only a 100 at a time.

After testing:
Tried to install Windows XP onto all 500gb of space, but system crash (by this I mean system would power down, not reboot, this also goes for all crash events that I'm reporting). After installing windows XP onto a 200 gb partition on the HDD, I have had no crashes and have been able to perform normal tasks.

Is there something wrong with the HDD? Don't know how formatting is done, but I'mguessing it starts on the inner bands of the discs and then works it's way out. If this is the case is there something wrong with the outer bands of the disc only?