Reinstalling Mavericks plagued with issues

I have a late 2011 MBP which I decided to restore (wipe hard drive and reinstall OSX) because it was slowing, unreliable and having too much kernal panic (which I believe is also called 'spinning ball of death').

I accessed recovery mode, erased using disk utility and then went to reinstall OS X. Then signed into app store for Installer to 'Download additional Components'.

Usually takes ~3 hours to download but never completes. Either presents an "error downloading additional components" message or returns to the main screen for the recovery program. I have tried multiple times, both via Wi-Fi and Ethernet. I note that, via disk utility, it appears nothing has been downloaded onto the hard disk.

Then I tried the following:

1. Internet Recovery mode (which restores the factory OS, which is Lion for this model): same issue arises.

2. Flush PRAM, reset SMC and try both again: same issue arises.

3. Try to diagnose hardware issue using Apple Hardware Test (option D on startup). This is where it gets more baffling. The tests, both normal and extended never finish. Even leaving overnight. They freeze (at 59 seconds, and 18 minutes, respectively). The normal test progresses through testing memory, logic board, but then freezes on 'testing' without further clue.

4. Called Apple Care who agreed I had tried everything they would do. Advise me to scour forums etc.

Here I am, tired and frustrated with this.

I worry there may be a hardware issue, I have no applecare and am out of warranty. I doubt I would get much sympathy from Apple but am feeling somewhat let down, their products are not cheap.