Mr Jack and molbiogirl seem to know what they're talking about. This thread has prompted me to do some reading up, if it helps Larni it seems that Neurologists think it's best to look at when things go wrong.
When you start up a computer and something goes wrong, you can definitely state something like "Oh, my graphics card driver is conflicting with my modem driver"*. This problem would have nothing to do with the physical condition of your modem or video card. Obviously it has to do with the semantics of the information stored within the computer. However if your graphics card has melted itself, then it is a hardware problem. Apparently, with the brain you cannot point to some specific level of neural activity and say "this is the level with the problem" and classify these levels into software and hardware.
Now there are cognitive activities which fit into these categories (Adding, subtracting are very "software"), but the vast majority don't and are simply neural processes with no such software/hardware divide. Pretty wierd, didn't fully realise it myself.
*A bug talking from Half Life 1 V1.1.0.9.