Is it covered?

I don't believe 2%-4% of PS3s have this error - that would almost be an epidemic.

10m PS3 --> 300,000 faulty consoles due to this error alone.

2.5 inch harddrives should usually be more sturdy compared to 3.5 inch harddrives.

My thoughts as well.

This problem isn't really a problem at all. I think the Error 80010514 scares stem from this thread on GameSpot.com. The guy provides no source for his claims, but the thread has grown to 21 pages in only two days.

Every consoles will have their problems (not like RROD) but 3% failure rate is reasonable.
Bigger question is - is it covered under warranty? If not, how much will it cost to fix it.

if you dont want to send your console into Sony, just get a new HDD. Probably can get a 160GB HDD for cheap. Plus this error doesn't happen half as often as other console's issues, its less then a fraction. Honestly what fanboys will try to spread.

Plus the 80GB HDD I have in my desktop right now is slightly faulty, this is why i bought a 160GB HDD for my main HDD and use the 80GB for program installs.

2-4% of hard drives fail. How do you explain the ones in the PS3 not? If it makes you feel any better, the same rate fail in the 360.

Hard drives fail. It's a fact of life. 

 yes, all HDDs have issues sometimes, but luckily thats not M$'s problem. lol