Apple Hardware Test, especially when you only runs the quick test, is a crude test that only essentially checks basic communication with the part. The Apple Store does more advanced testing which could show results otherwise not seen by the basic Apple Hardware Test.
A good thing to know is if the SMART status of a hard drive is failing, then you know it is dying. It is a basic warning of impending failure or corruption.
Disk Description : WDC WD5000BEVT-22A0RT0 Media Total Capacity : 500.11 GB (500,107,862,016 Bytes)
Connection Bus : SATA Write Status : Read/Write
Connection Type : Internal S.M.A.R.T. Status : Verified
Partition Map Scheme : GUID Partition Table
According to Disk Utility it is okay, however the hard drive may be failing. When it will completely fail could be a day or 10 years from today. Regardless I placed a RMA to WD and will install the new drive. Will I easily be able to restore from backup from the SL boot CD's and from my Time Machine backups?