Can Apple Hardware Test fail to detect a dead harddrive?

JDG 500


I am having all kinds of problems with my computer since installing a recommended update a week and a half ago. I cannot fully restart it, cannot make repairs with disk utility, and cannot reinstall OS X to the harddrive volume because it doesn't list any available volumes. My hardware profile, as listed in the Hardware Test utitily, is as follows:

Product: MacBook
Mac Model: MacBook 2, 1
CPU type: Intel Core 2 Duo
Number of cores: 2
CPU Speed: 2 GHz
L2 CPU Cache (shared): 4mb
Boot Rom version: MB21.882.00A5.B07.0706270922
System Serial #: xxxxxxxxxxx
SMC version: 1.1780

Overview: 1024 MB
(details about RAM)

I ran the hardware test, choosing to perform extended testing (took ~40 minutes), and the result was "No trouble found." I noticed there is no mention of hard drive space - should there be? This information doesn't show up anywhere in the disc utility diagnostics/profile - leading me to the thing the harddrive is busted - but the hardware test found no problems. Is it possible that the hard drive can be dead but that the hardware test fail can fail to recognize this?? Any suggestions?

Also, can anyone confirm that if I do need to just replace the hard drive, I should be looking for a 2.5" SATA drive?

Your thoughts and suggestions are greatly appreciated - thank you. -Joe