It does sound like the hard drive has headed "south", but have you tried visiting the drive manufacturer's site and downloading a disk check utility. It should give you a better idea of the drive's condition and whether it's recoverable.
Hope this helps.
I have a PIII 733mhz dell with 384mb ram...resently its been freezing up every few days and on sunday it happened several times. the last few times it started running scandisk after rebooting, each time it got to 99% (with no bad clusters) and then froze up. the second time it did this when i rebooted my system would start to load and then give me an error message "bad file..." after rebooting with my startup disk i found that it is no longer recognizing my c drive...i've had computers crash before over the years and worst case scenario i could just format the drive and reinstall. now i can't even do that.
i can't afford a new system right now, but would replacing the hard drive solve the problem?