Since SMART provides a "Reallocated Sectors Count", I'm as baffled as you as to why your failing disk didn't show a count of sectors reallocated (if that was happening).

Whilst trawling for problem, i have with windows 8 and IE ( pages not displaying )
Came across this, similar info in events to yours.May or may not be revelent.

After the error happened again and some further investigation, it seems like Windows Update Service is the problem. To fix it, go to control panel-troubleshooting and run Windows Update Repair, after the repair, remove the cached Windows Update files, you can do this by right-clicking on c: drive-properties-Disk Clean-up once it opens and scans the system, select Clean up system files, it will do another scan, select Windows Update Cache files and free the space, clean up the other unneeded files too. It looks like that fixes the problem.

Hi Flip,

How did you come across your problem originally then, was IE crashing? I did what you said thanks and it did find something wrong look:

http://i47.tinypic.com/1zfj4m8.jpg

Did the system files clean up too so will see how things get on

It carried on doing it and it wasn't great when online gaming, every time it froze and came back it had disconnected me. I have since gone back to Windows 7 and so far touch wood is absolutely fine.