Old post, i know, but --
First, you could try to repair the drive. When you insert the OS X installer CD, at the very beginning, there is a menu called Utilities. Open that and Run Disk Utility. You may be able to repair the drive enough to reinstall the OS. Be sure not to format or erase the drive.
If not, You can buy an external USB drive, install OS X on that, and boot from it. Once you are in OS X, you can run any number of utilities available online to rescue data from the problem drive. At the very least, you will be able to save your data.
I have had good luck with DiskWarrior in the past.