Computer Meltdown

I recently experienced a ridiculous computer failure, all starting from a virus. It all started a week ago, on Friday night when I started an installation of a program, and all the files associated with it suddenly disappeared. Not long after, I used AVG anti-virus to scan for viruses, and it found a Trojan.horse. AVG removed it for me and all was fine, but after 10 minutes a virus warning popped up so I started the scan again. This time it told the truth, it was a generic type Trojan infecting my core windows files, and basically that it cannot remove or do anything with the infected file, services.exe. This file name is commonly used as a 'mask name' for malicious software.  it was a generic type Trojan, infecting my core windows files. So I manually found the infected file and tried to delete it with no such luck, and after doing research and trying various non-destructive methods nothing would get rid of the thing. It started getting worse. I opened my browser(Mozilla) and pop-ups go everywhere, and everything was very slow. Not long after several of my programs including my browser wouldn't launch, and I had enough. I used File Assassin, which is associated with http://www.malwarebytes.org to delete this file permanently from my hard drive. After deleting, it said my computer needed to restart to complete changes, so I let and when it turned back on and loaded to the point of signing in I had nothing but a black screen and a cursor. Oops, so I used a boot CD with diagnostic and recovery tools to delete everything off of my hard drive so that I could simply re-install Windows XP and go from there. After 12 installation attempts it finally installed the operating system, and by that point I was worried. Before even the Microsoft updates were complete, I received a system error message,  followed by a blue screen with a failure report and a shutdown. When I turned on the computer again it read 'Please insert bootable media'. That is bad, and my hard drive was toast. And I am still not sure. . . how did a virus physically destroy my hard drive?