Well, the 320GB Western Digital hard drive in my 24" iMac is dieing by degrees -- it started happening literally 15 minutes after I had ordered a 2TB Seagate 5900RPM hard drive and external enclosure from NewEgg; with a big crash...
I reinstalled OSX and it seemed to be okay. When the drive arrived, i started to do a Time Machine backup -- and it would freeze up a few GB into a 157GB backup...
Then, it failed to boot...
Generally, the thing to do with a failing hard drive is to power it down and not bring it back up until you are in a position to attempt to recover data from it. Writing a bunch more data to it (i.e., OS reinstall) is not generally a good idea. Frequently, hard drive failures can be exacerbated by continued use.
I think it may be linked to the frequent power outages we have been having -- I have several battery backup units for my various machines, but they do not all work right. About 2 months ago, the PSU got fried on my 4200+ machine, and the iMac was also abruptly shut off by this event. I have two other older machines (one is being repaired for relatives) that have needed to be rebooted at least once a day because of these very short power problems.
UPS batteries are generally only good for a couple of years, IME. Good units will tell you when they need a battery change. Not-so-good units will claim to do that, but then not really do it. And some cheaper units are just plain flakey regardless of their charge level.
About the only thing I'll plug into is an APC Smart-UPS. Not cheap; but also not that
expensive compared to the toys that get plugged into them. And frequently you can find a deal on eBay.
The bottom line is the iMac's HD is at the shop and I am hoping that they can recover at least all my family photos. I can replace almost everything else. And I have a new Samsung 500GB F3 on the way that I will install in the iMac -- and I will check out all my battery backup units... I swear that I just replaced all of them in the past year or two!
Best of luck to you. The folks at the Apple store will not be equipped for any serious data recovery; they may be successful if things aren't too bad. If that fails, there are professional data recovery services. They are not cheap; but they are generally successful.
You might also want to think about a RAID1 solution for your precious memories.