HD crashed today. What happens to old one??

My 500GB HD was making a loud clicking noise this morning and it wouldn't wake up. After a bunch of diagnostic tries with Apple support on the phone, they told me to take it to my local Apple store. The final diagnoses was as suspected, a complete HD failure. I have been using Backup and backing up the "Home" folder to an external firewire HD and the "preferences"? to .mac as recommended by the Backup program. So it appears as though I have my data. I learned today that I made a fairly big mistake by not backing up the entire HD as I have to reinstall all my applications. I am somewhat new to Mac and thought by backing up my Home folder as recommended, I would start right up exactly as my system was. Lesson learned. My question is, what guarantee is there that my old HD and its' data is going to be destroyed? Does anyone know what Apple does with the old HD? I tried to get them to let me keep it but they said they have to return it to Apple. I have a close friend that designs HD's and I wanted to send it to his lab so that he could dissect it and copy the data onto a new drive for me. The store has to order the new HD and so I have a day or two to go back into the store and take the computer somewhere else (as recommended by the Genius). He told me that he would have to charge me full list for a new HD if I wanted to keep my old one ($400+/-) and that I could buy one from an independent shop for a lot less and have the work done there. Is that what most people are doing in order to protect their old data? I'm an Apple fan but I am uncomfortable with his recommendation. I paid for Apple Care and now I am being told that in order to keep my old HD I need to go elsewhere for service.
Thanks for any info or advice,
Dave
24" iMac, 2.33 GHz, 2GB Ram, 500GB HD   Mac OS X (10.4.10)  

Hi David MacArthur!
Being located in the D.C. area, you certainly have valid and noteworthy concerns. Thanks.
Did you try starting it up in Target Disk Mode?
Sometimes that's possible, and is a last-minute method of retrieving unique data (copy it over to another Mac) prior to total failure of a hard drive. I would NOT waste the effort to retrieve applications - what if they're already corrupted? It might be worth the effort to try and erase the failed drive via that procedure.
As to the Genius' comments, the fact is that Apple does not appear (I've asked in the past at several of the Apple Stores) to normally sell/install replacement hard drives (except perhaps now for the Mac Pro), but that work is usually contracted out - to the very same oufit you might hire (and without the guaranteed addition of an Apple markup).
A failed drive would be "returned" [perhaps not in fact, but on account] to its manufacturer in exchange for an adjustment to Apple's account, probably based on an incentive/dis-incentive formula of some sort that is contained in the supply contract between the two companies. That (contract provisions) is the only way Apple would have to encourage and enforce quality product from its suppliers, while simultaneously minimizing the cost for Apple's consumers.
With the assumptions that internal corporate/store Apple must have about the same hard drive failure rate as do the rest of us Mac users, that failed drives are handled not by individual users but by IT staff or through contract, and that it would be highly unlikely that Apple ships all its own failed drives to a central location where they are melted into a big blob, then it would seem that it would be in Apple's self-interest to be protecting their own sensitive data [surely more sensitive than mine is] through proper secure handling of all failed drives. If not, how would they be preventing an individual case of mistaken handling? As to the printed warning language, I expect it most likely exists mainly in an effort to limit legal liability and legal defense expense.
As for increasing privacy, due to proven known issues regarding the vulnerability of one's trash, I for one am now cross-cut shredding all home and business printed trash, mail and yes, even envelopes. And, yes, it can still be recycled after that point.

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