Before you reformat, I would try repairing the partition. It also may or may not be caused by a failing hard drive. The spinning beach ball and slow down certainly are signs of a potentially failing hard drive, but there may be other things that could cause that as well.
The first step is to backup your important data.
The next step is to attempt to repair the drive. Disk Utility is reporting "minor" damage so there is a good chance Disk Utility can repair it. But, because it is the boot volume, you need to repair this from a system install disk.
Follow the "Try Disk Utility" instructions at
http://support.apple.com/kb/TS1417. Essentially, you will boot to an install DVD by inserting the DVD and holding down the "C" key. Once booted, you will pick a language, and then open Disk Utility from the menu.
Select your boot volume in Disk Utility and click "Repair Disk". It will verify the volume, attempt to repair the damage, and then reverify to determine if the damage was fixed.
Give that a shot first. It's a simple procedure.
You may also want to consider looking at the SMART values on your hard drive to see if there have been any reallocated sectors. You can check your hard drive with a S.M.A.R.T. analysis tool, like
http://www.volitans-software.com/smart_utility.php (not affiliated with at all). This tool gives you 5 free uses before you need to pay for it. What makes it nice, is that it shows you the individual parameters. It doesn't just mark the drive "OK" or give you just a green light.
You are looking for the "Bad Sectors" parameters. You can see, on my hard drive they are all zeros. This is optimal. (Given my job, I'm pretty religious about changing hard drives that look like they may fail.)
Google actually did a huge study about this and also found that any reallocated sectors often signaled an impending hard drive failure. You can see an article about the study here:
http://www.engadget.com/2007/02/18/massive-google-hard-drive-survey-turns-up-very-interesting-thing/
Good luck,
Jeff
