Laptop 320gig hard drive bad sector?

Yes retired means it has set them to not readable / usable, so could be was really supposed to be a 500GB drive that had bad sectors and they 'sealed' those off from Windows and resold it as 350GB, or would just be that first sign of eventual HDD failure anyway (doesn't matter version of Windows your on). While the computer is "run fine" in the good sectors, that is like the gas tank is full in a car, still has nothing to do with the 4 flat tires you still want to drive on. Just face it the drive is toast and buy a new one.

You may be confused by two very different ways of handling "bad sectors".

On all modern HDD's the drive's board has some sophisticated self-checking and correction routines built in that are hidden from the OS. On virtually every read operation the drive checks the signals from the heads. If it detects that they are weak, it assumes the sector just read is deteriorating. It then makes sure the data it read is clean and correct if at all possible. Then it "retires" that sector so it is never used again, and replaces it with a good sector from its stock of spares. (The spare good sectors are identified and kept in on-disk records at the time the HDD is first Low-Level Formatted in the factory.) The system also keeps a record of how many times this has happened, because it has a limit of how many such replacements it can make. This is probably the information you got from HD Tune. At some time in the future if the number replaced exceeds a limit, the system sends out a message as part of the SMART system to warn you of this. That is when you should plan a quick replacement of the whole drive - while the HDD is still working well and BEFORE it runs out of good spares. Note that, as long as this works and no sudden catastrophic damage destroys a sector, the HDD can prevent data loss for you.

ALSO, note that because of this, the OS (Windows for you) does not even know that a "Bad Sector" was detected and replaced. As far as it knows, every time the HDD is asked for data it gets it no problem. When you run CheckDisk it normally will NOT find any "Bad Sectors" because it will not encounter any read failures.

CheckDisk calls something a "Bad Sector" when it tries to read from a Sector and the HDD replies that it cannot do that (after several re-tries). At that point Ckeckdisk will mark that Sector as Bad in its own tables (not the same place that the HDD keeps its hidden records) and request that the HDD assign another Sector to take that one's place in the file it was trying to use. Note that CheckDisk CANNOT copy the data to the new replacement Sector - it never got good data from the "Bad Sector" because the HDD itself could not read it. So, although the file in use now has a "Good" sector replacing the old "Bad" one, the data in it is wrong and the file is corrupt. However, if you're lucky, this "Bad Sector" was found by CheckDisk during a scan that was NOT in an area with an actual file on it, and so no actual file is corrupted, and everything is OK.

So how can CheckDisk encounter a "Bad Sector" if the HDD itself is trying to fix those in a secret process? Most commonly this happens when a Sector has significant physical damage so it cannot be read at all, AND it is NOT already in use in a file. If it is never read, it is never found by the HDD's internal process. But if CheckDisk specifically asks for that Sector to be read as part of its tests, that's when the HDD's own internal process will discover the flaw and, since it is so bad it cannot be read, will report a Read Error that CheckDisk identifies as a "Bad Sector".

Bottom line is, HD Tune is telling you that a small number of such replacements have been made in the life of your HDD. CheckDisk is telling you that, as far as it can tell, there are NO faulty Sectors on the HDD. That's because ALL of the faults have already been found and fixed by the HDD's internal process. The number of replacements made so far is rather small and has NOT triggered a SMART error warning. In fact, re-check what HD Tune says and look for the SMART messages to verify this. Until those replacements become much more numerous, your HDD is just fine, and doing what it should to protect you and your data.