Yes, it sounds bad
The biggest issue with the Geek Squad is they charge way too much for their services. It's entirely possible that your hard drive failed or was failing, but it is coincidental that it did so in their hands. They are struggling to justify their existence. Best Buy should never have scooped them up - they are giving them a black eye in many ways.
Your issue would have been best dealt with by first scanning your hard drive for viruses. Depending on the results, either the virus(es) could have been removed safely or require your data to be backed up and the hard drive formatted and then restore/re-load the operating system. Often times viruses cause damage to system files which would take way too long to "repair". In those cases, it makes more sense financially to format and restore, not to mention a overall better result for you. However, based on what you described as your initial problem, it sounds like a fake anti-virus program installed itself, likely from a website that either was malicious or contained infections the webmaster for the site was not aware of. Removal of this type of infection is something I charge $59 for.
If what the Geek Squad said was the problem was true, a reasonable charge would have been as follows: $60 for a new hard drive; $70 for security/anti-virus protection; about $120 in labor charges. And this would be on the high end. So, about 1/2 what they ended up charging you.
Bottom line: Geek Squad is over-priced for what they do. They also cannot be trusted, often exaggerating problems to increase the total sale. You're better off seeking out a local freelance or small operation for computer service. In my case, I take care of small businesses and residential customers in the Dallas, Fort Worh, TX area - every customer I've worked for has referred me to others and/or called me back for new/other issues. http://assureteks.com