Strange Occurences Of Boot And Run Errors, System Unstable?

To start off, I would like to explain the situation the laptop was in when I received it from my sister and what she informed me of how it happened. The laptop has only one hard drive, it is running one partition of Windows 7 Ultimate 32 bit.The computer froze while she was listening to music, the hard drive activity was halted, music was stuttering, she forced shutdown after ten minutes of no response. The computer then noted the inability to boot after the POST was initiated. A screen appeared noting Windows 7 needed to run a start-up repair before beginning (Running the start-up repair ended with a long boot time and eventually hanging up with a black screen with an enlarged cursor that could be moved, no further progress. The second option to start with the last settings for boot resulted in the same result as the first. What I did to fix this problem, I tried using safe-mode to see if the problem was driver based or software based, as my sister noted she did not install or tamper with any software before the problem, I was unsure of how to proceed. All attempts of booting into the various safe-mode protocols resulted in the computer hanging on loading CLASSPNP.SYS, then after a minute it would result in a BSOD with 'unable to mount boot volume'. The Windows 7 recovery disc lead to the same result of trying to do the repair or booting up normally, hanging with the large cursor in the middle. I eventually decided to load up some utilities and used a Gateway (The computer brand) hard drive scanner to attempt to fix the problem, this worked, miraculously. After this fixed the problem I was able to boot normally the first time, yet it ran startup repair, and fixed a few errors before booting. The system as it stands now,The system boots up in normal time without any errors. Safe mode still hangs and blue screens after stopping at loading CLASSPNP.SYS. I hoped to run chkdsk and sfc through the command prompt to try and see if it could fix this problem, yet both hang before running. 'sfc /scannow' through the command prompt gives the result 'Windows Resource Protection could not perform the requested operation'. 'chkdsk /r' through the command prompt runs at the next boot and gives an error along the lines of 'Windows can not run chkdsk due to a recent software change' and then proceeds to boot up without doing the scan. I've cleaned the system of malware using various tools to see if this was the problem, yet it does not seem to make a difference. I have attempted to replace the 'CLASSPNP.SYS' with a working copy off of my computer, yet it results in the same situation. Running start-up repair with the Windows 7 recovery disc does not work and says it is unable to proceed now, strangely.I am wondering if doing an upgrade to the same copy of Windows 7 will allow me to have a clean boot record and hopefully fix the problem. It creates a 'Windows.old'; this should be fine for the current situation, right? My sister plays various games such as the Sims 3 and a few others, and has 40GB+ of music on here that she does not want to lose. Will performing an upgrade(if possible in this situation?) keep the music, and actual application folders that could be run on the upgraded system? If not, I could scrounge up a hard drive to create a backup of the music and the game save files, but it would be annoying to have to install all of the game over again.