Speaking as someone who services them for a living, I can almost guarantee that you are experiencing a HDD failure. It could be the IDE channel, but thats a lot less likely, especially on one of the later ones like yours.
Boot from an OSX Cd (pop the cd in, hold down the 'C' key as soon as you power it on, until you see the apple logo appear), run disk utility from the utilities pull down menu and perform a verify on the Hard drive.
