I would suggest backing up (if you don't already) and get a replacement drive pronto. Don't wait because drives often fail quickly without warning, so consider yourself lucky that you're receiving some warning and act on it.
My old iMac G4 (running OS 10.4) has been running sluggishly with sporadic freezes & "spinning pizzas" for several months. I launched Disk Utility which displayed the following message "SMART: failing".
I attempted to restart the iMac but it would freeze immediately after the "gong". I was, however, able to restart from the install CD. I attempted to run Repair Permissions which froze. I ran Repair Disk which reported that "volume cannot be repaired because of an error".
I restarted from the Disk Warrior CD. The hardware test indicated that "the built-in SMART indicated everything is normal".
Is this all indicative of an internal drive that is behaving unpredictably & about to die?