Acer 532h-2223 major problem

I bought an Acer aspire 1 netbook for the wife for christmas and have had a few problems with it to start but now it does nothing but go to the desktop screen. Windows 7 starter is installed.

A little history:

Worked great out of the box. Soon after she got it she laid it down on the couch and it over heated and wouldn't start up till it cooled down. Worked fine after that. Several days ago, she said that it was so slow that she couldn't hardly use it so I started messing with it. She was right. As she had not put any files or pics on it and didn't have a restore point yet I just just rebooted and erased all files and started from scratch.

All was well again until yesterday. She said it was slow again and decided instead of shutting down the computer she logged off. Since then the computer will act like it is starting up but asks to "Launch Startup Repair" I click on that and then it will go to "Windows is loading files". Then a black screen for a few minutes. The desktop will come up with no Icons and a white cursor in the middle of the screen. The cursor will not move and I cannot bring up the task manager with ctrl alt delete. If fact nothing works at all. I can hear the hard drive clicking and the blue status light blinks for a few minutes and then nothing. I don't know if this is a computer problem or a OS problem.

Any help would be appreciated.