The drive failed today. Clicking sound on booting it. I pulled the drive and mounted it on my iMac which has the excellent ThermalTake BlacX external USB drive enclosure. Luckily, I seem to be able to use the Disk Utility to create a disk image of the failed drive. I know, I don't understand but I have an image now. I bought a new WD Scorpio Blue 500Gb drive in Best Buy for 107 bucks tax included. I then inserted the new 500GB drive in the iMac using the BlacX and then used disk utility to create a single partition 500Gb drive on it. I'm using superduper right now to copy and expand the image file I made earlier to the new drive and then it should be boot up in the MacBook.
SuperDuper is paying for itself pretty easily at this point. My favorite disk utility. But, I did notice something I can't explain yet. I initially backed up the old drive using superduper and created a sparse bundle but I was unable to select this as the image to copy to the new drive. This is why I then used disk utility to make an image again. I'm not sure how useful a sparse bundle image is for this kind of work but it doesn't look useful at all after this experience.
The new drive is installed in the macbook now and everything seems fine. So, the sequence was to use disk utility on the iMac to make a disk image for the 'failed' drive on the main disk. Then superduper copied the disk image to the 500GB new drive and it's working.