I have shallow very hard clay soil. Do I need to remove the hard clay soil and replentish it with new top soil? Or, is there some way to re-condition the soil. I haven't had any luck growing grass in my yard. It also requires lot's of water. What are my options?

Compost, compost, compost and then add more compost. You don't need nor should you replace your soil. Lava sand, and molasses will also help. If you have trouble finding enough compost the buy humates - a bunch. Compost and humates will resore you land and it will hold water in due time. A little corn meal can be helpfull as fertilizer and fungus preventive. Also organic fertilizer will be helpfull after the grass gets healthier.
Robert D Bard