Good Morning Kiti and welcome back to CH
Boy I am sorry that you have had so many problems with the PC. But at this point and time here is what I would do and check for.
#1... I know you said that the org copy of W7 was pirated but then they went and bought a real copy of W7 when they bought the copy of W7 did the Microsoft Windows 7 Home Premium 32 bit COA (Certificate Of Authenticity) most OEM copy of Windows OS look like this
and the number will be 25 digits long (5 groups of 5 letters and numbers) get put on the PC's case some where?. If so then is there any one that you can borrow there W7 disc so long as it is a W7 Home premium 32 bit you can use it for repairing the damaged windows files. Plus if needed you can use this disc for installing the OS and if you borrow one it would save you a few bucks for the time being.
#2...But I am sorry I don't know what ISO thing you are talking about for 35$ this ISO recorder is a free UT here is the link for the W7 version of it if you wish they do take donations if that is what you are talking about
http://isorecorder.alexfeinman.com/W7.htm. But if there is no W7 COA sticker on the case and you need to buy a new one here here is one from NewEgg (I have bought from them for 15 years and I trust them) on the link there is W7 Home Premium 32 and 64 bit versions for 99.00 with free shipping
http://www.newegg.com/Store/SubCategory.aspx?SubCategory=368&name=Operating-Systems. Here is another company that I have bought stuff from over the years and has been good MWave
http://www.mwave.com/mwave/subcat.asp?CatID=790&parent=2^121&pageTitle=Operating%20System.
Just in-case you may be wondering what the cost difference in-between the cost of the say HP (home Premium) disc's. They make Retail, OEM's, upgrades etc. You should be fine with the OEM they tend to be the cheapest the only down fall to OEM's the COA can not be transferred to another PC.
***just a note Windows 7 32 bit will only see and utilize 3 to 3.5 gigs of memory & Windows 7 64 bit will see and utilize but this up to 16 gigs but the max amount of ram also depends on the motherboard so your max of ram is 8 gigs for your motherboard. Having a 32 bit OS is the most compatible with some hardware and software so this is up to you. If you decide you want 64 bit make sure all your hardware is 64 bit compliant. Printers, scanners, 3rd party software etc. You can check your software and hardware here to see if it is
http://www.microsoft.com/windows/compatibility/windows-7/en-us/default.aspx #3... Because of all the problems you have had you still may want to test the HD (hard drive) & the memory just look back at post #20 for the links. But it is possible that all your issues are just from the OS being corrupt and not a hardware issue. But it can't hurt to be safe
The testing tools are free and the only cost here would be the cost of a couple of CD's and your time. But if the hard drive has bad sectors you will always have issues using the PC and or you will have a HD failure in the future now if the memory is bad you can have all kinds of strange errors that pop up, random freezing and general over all performance issue or all the above.
#4... When the PC was R&R'd and the OS was installed the file corruption can come from a couple of different things. The DVD drive it self may be on it's way out so it didn't get all the files needed to install the OS correctly or with the copy of W7 that was pirated so again it may not of had all the files needed to install the OS correctly. But when they did buy another copy of W7 maybe only a repair was done and not a format and fresh install so some files still could have been damaged? sorry I don't know as I can only speculate
#5... I would either borrow (if you borrow one so long as it is a W7 32 bit it will work & doesn't matter if the disc is HP, Dell or OEM) or buy a real copy of W7 HP to fix the PC. You can try doing a Windows repair by going safe mode by pressing F8 and pick repair, but you may need the W7 disc to do this but some times you don't need the disc. But in one of your posts you did say that the PC was freezing even in safe mode so trying this may not work. I know that you really want to learn how to fix it so you can have a better idea how things work etc. But if you have a W7 disc you can boot from the windows disc and tell it to do a repair if you wish to try repairing this way may work because windows will repair it self by using the files off the disc instead of using the windows files that are on the hard drive if that makes since. But in the long run personally my self I would save my files / data that I want and I would get my hands on a W7 HP disc & do a clean install.
Here is my steps that I do when I do a fresh install of the OS
*Save all data, Pic's, music, documents, fav's etc.
*Have all Disc's (windows, driver cd, etc) if there is no driver CD than I download the drivers from the manufacture web site just make sure you get the correct versions in your case right now that is W7 32bit.
*Unplug all devices but Cat cable, keyboard, mouse, monitor, speakers.
*I do a full format of hard drive
*Install OS (operating system) even if W7 has the drivers please install Asus drivers instead you will get better performance and it will be more reliable.
*install drivers in this order: Chipset> video drivers> sound drivers> NIC (network interface card) Wireless card (if you have one) > Modem etc
Then update OS and activate on line.
Then transfer all data back.
And yes I know my post have been very long for you sorry
I am just trying to put everything down so you can the least amount of hiccups as possible. Please let us know you you make out and what you decide to do, Mike