I know this is an old tread but it sounds like you have to many files in the root of C:\ if you do even if you have an 120gig drive it can say it's full and can't write anymore information to the drive.
usally scandisk as it finds corruption will place the pieces of files it finds in C:\ very common problem with win9x just remove the files with the same names should be hundreds of them in c:\
c:\move *.chk c:\temp
will move all the scandisk recovered files to temp so you can look at it later. you should find you have space again...
