Follow these steps, until your Mac is operational

Step 1. Resetting PRAM and NVRAM

-Shut down the computer.

-Locate the following keys on the keyboard: Command, Option, P, and R. You will need to hold these keys down simultaneously in step 4.

-Turn on the computer.

-Press and hold the Command-Option-P-R keys. You must press this key combination before the gray screen appears.

-Hold the keys down until the computer restarts and you hear the startup sound for the 2nd time.

-Release the keys and let your system boot up.

Step 2. Restart in Safe Mode

Shut down your Mac. Next, power your Mac back on. Just after you hear the startup tone, press and hold the “Shift” key. You can release the Shift key after you see the gray Apple and progress indicator. Your Mac should boot up into Safe Mode. Then reboot your Mac and test under a normal boot up.

Step 3. Run Disk Utility in Single User Mode

The best way is to boot for your original installation disk, and use disk utilities to "repair disk". If, for some reason, your installation disk isn't handy you can do the same thing by booting into single-user mode (by depressing the command (Apple key) and S keys at startup), which takes you to a terminal-like screen. At the prompt there, type the command: "fsck -yf" (without quotes and note the space). If it doesn't find the command, type /sbin/fsck -yf instead. If it complains about permissions type: "sudo /sbin/fsck -yf" and provide the admin password XXXXX prompted. If it finds errors, repeat this command until no errors are reported and you see the "...OK" statement. This check may need to be run up to four times on a system with serious problems. When you get the "...OK" message, type “Reboot”. Your Mac will restart and return you to the User GUI interface.

Thank you for your reply. Please proceed with an reinstallation of OS X. The following will guide you through the process:

1. Insert your Mac OS X Install DVD or Installation Disc 1.
2. Restart the computer and hold down the letter "C" as the computer starts up.
3. Continue to hold down the letter "C" until you see a grey screen with an Apple and a small spinning gear.
4. Select your language on the Welcome to the Mac OS X Installer screen and click "Continue".
5. Click "Continue" on the following screen.
6. After reading the Software License Agreement, click "Agree".
7. Select the volume to which you are going to install. "Macintosh HD" is the default name.
8. Click the "Options" button in the bottom corner of the window and select your installation type. (If you want to retain your data and programs, choose Archive and Install)
   
9. Click "OK" and then "Continue". You will be presented with a confirmation window at which point you can click "Install" to proceed.

Thank you for your clarification. I am assuming that you followed my directions closely.

Your hard disk has failed and needs to be replaced.

Common symptoms of a dying hard drive

Hard drive is making a clicking, whirring, grinding, ping pong ball noise or any other type of unusual noises.

Hard drive is not spinning.

Computer is not recognizing the hard drive.

Sluggish loading of applications.

System freezes and hangs.

An interesting site - Hard Drive Sounds by drive manufacturer.

Your hard disk has failed and needs to be replaced.

Yes

Sure. Boot up and then try to run Disk Utility and Verify the disk.

At the prompt there, type the command: "fsck -yf" (without quotes and note the space). If it doesn't find the command, type /sbin/fsck -yf instead. If it complains about permissions type: "sudo /sbin/fsck -yf" and provide the admin password XXXXX prompted. If it finds errors, repeat this command until no errors are reported and you see the "...OK" statement. This check may need to be run up to four times on a system with serious problems. When you get the "...OK" message, type “Reboot”

You can try this software but I'm not sure it will work for your hard drive. It's probably best to replace.

http://www.alsoft.com/diskwarrior/index.html