I've never heard of a failing HD causing sleep issues.
If you're running at least 10.4.11, go to versiontracker.com and download SMART Utility. You can use it in demo mode. It will tell you if your drive is failing (SU is excellent at predicting drive failure, unlike the SMART Status in Disk Utility which only tells you after your drive is toast.)
Once you ascertain that your drive is OK--and it may indeed be failing, it's old enough--then you can start looking for other causes. Have you tried resetting the power manager? Apple's instructions are here: http://support.apple.com/kb/HT1431?viewlocale=en_US
Keep in mind that you may have a failing hard drive, but your sleep issues might be due to something else altogether.