VGA works only

I have a Medion Akoya P5300 D Computer.

Windows Vista Home Premium (32-bit)
Phenom X3 processor 2.1G
2GB MM
540GB HD
ATI Radeon 3200 256MB Graphics PCI-E

I've had it for about 1-1/2 years or so and it has performed great for me. Of course warranty has run out and it starts having problems.

Anyway, it will not boot normally into windows without the display adapter drivers being uninstalled. Using VGA mode, the computer will come up.

It comes up in safe mode and I uninstall the display adapter drivers then reboot and it uses standard VGA mode.

I thoroughly blew out all the dust bunnies, etc., reseated card. No help.
Reinstalled drivers, no help. So I figured it was the graphics card.

Virus scanned everything as well, no viruses found.

Bought a XFX ATI HD4350 1GB PCI-E and installed it. Same problem still.

So now I figure it must be the Main board.

Any other suggestions before I shell out $100?

My original description was a little off - it has:
3GB DDR2
640GB Hard Drive SATA
ATI Radeon HD3450 256MB

Yes, I decided to look at that. I perused the system event log and found it had a disk write page error before everything hosed.

So, I ran the recovery disk to put everything back to original. It ran fine and booted. I found that the display adaptor was still only standard VGA. Being that I had the new GPU in there, I installed the drivers for it. The system came up and I toyed with the graphics settings for a while and all seemed well.

But, then my LAN interface was not working. So the LAN driver must have got put into that bad cluster this time. I had no problem reading it as I could copy it just fine. But it still would not work, so it must be corrupt. I merely renamed the driver file to BAD???.??? to occupy the same spot on disk and reinstalled the driver from the recovery partition. The LAN device then came up and worked fine.

So now everything seems to be humming along again.

But, I found all of my docs related to this PC when I went looking for my recovery disk. This thing is still under warranty . I thought it was only 12 months, but it is 24 months. So it is still covered.

Do you think I should send it in and make them replace the hard disk?