Ok. so you have bad clusters on your hard drive. This may or may not be fixable. It really depends on how bad and how many of the clusters are bad. But a low level format could help, or it may just prolong the agony.
What you need to do is run a partition removal debug script on the hard drive. This wil ERASE EVERYTHING on the hard drive, so backup your data first or its gone. You will need a windows 98 or ME boot disk on floppy for this to tool to work.
Debug Script. This is just a basic run through of debug. After you do the debug then you need to reboot and run fdisk and reboot and format the hard drive. If these steps dont work then you will probably need to buy a new drive. Let me know if this helps and if you need anymore explanation. Also let me know if you dont agree, Im open for discussion.