Blue screen of death with HDD Hardware Test error on iMac HELP!!

My iMac is not starting up.  It just get the blue screen of death during startup.  It is a 2.66 mghz duo with 2gb 800 ram.  I was able to get the Hardware test to run and got an error of 4M0T/2/40000004: HDD-1560.  I am assuming it is an error with the internal hard drive since I have nothing else hooked up to the mac other than the keyboard and mouse right now.  Does this code mean my hard drive is completely shot?  Any help would be appreciated.

4M0T/2/40000004: HDD-1560.  
Either failing or failed   
You can have Apple replace the drive at a nearby Apple store or an Apple certified repair shop.
Apple - Support - Check Your Service and Support Coverage

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