That is a little strange, since a bad hard drive will usually stop the system in the bios and not even let it try to boot.
Have you updated the bios lately? Since it seems to be stopping where the drivers are being loaded, maybe it can't handle the 500 G drive. If it is a Seagate or WD, they have diagnostic utilities you can use to check the drive, but it might wipe the drive.
Maybe put that drive in an external enclosure. But I would have bet the 80 G was the problem one, but if you took it out and the system had problems, I guess not.