A High Load_Cycle_Count is not one of the pre-fail attributes. Even though your SMART status says the hard drive is OK... chances are very good that it is not ok based on your description of noise and speed. As for running at full speed while holding down R in mhdd... I have no idea.
Hard drives that are near the end of death can make many strange noises. Constantly power cycling the drive should not damage it.
I don't trust the pass/fail guidelines that the manufacturers offer with their SMART attributes. I have seen it happen many times that hard drives are corrupting data and acting flaky even though the SMART status has a big green OK next to it. I recommend looking at the raw data counts (using HDTune in windows or smartctl in linux). From there you can make a more educated decision about the health of your drive.
Google created the largest consumer hard drive failure study... so you might want to look at their findings from 2010:
We find, for example, that after their first scan error, drives are 39 times more likely to fail within 60 days than drives with no such errors. First errors in reallocations, offline reallocations, and probational counts are also strongly correlated to higher failure probabilities. Despite those strong correlations, we find that failure prediction models based on SMART parameters alone are likely to be severely limited in their prediction accuracy, given that a large fraction of our failed drives have shown no SMART error signals whatsoever.
http://static.googleusercontent.com/media/research.google.com/en//archive/disk_failures.pdf
You also might enjoy the wikipedia article which outlines the various SMART atributes and which attributes correlate with electro-mechanical failure.
http://en.wikipedia.org/wiki/S.M.A.R.T.
The only proper way to fix a hard drive is to replace it. Fixing the one you have is something you'd only want to do if you are trying to recover data from it... and even then, you'd want to migrate everything onto a new drive. I think it's safe to say you have a broken hard drive.