Before you do ANYTHING make sure you have a good a backup. I see you have a Time Capsule to check to see if your backup is OK.
Next Insert the original Leopard Install disk in the Superdrive. Restart, when you hear the startup tone hold down the Option key and choose the Install Disk. Select the language then click the Utilities Menu and choose Disk Utility. Run Repair Disk from there, you will need to run Repair Disk multiple times until no errors are found. If you continue to get errors take the machine into an Apple Store or AASP to have the HD replaced. Make sure you let them know you have been backing up on Time Capsule and want to restore your backup from there.
Thank you for your reply. I just want to verify one thing before I try this. Do I use the original Leopard disk that came with the computer when I bought it or do I use the Snow Leopard disk from when I purchased that upgrade? If it is the original Leopard disk will I then have to reinstall Snow Leopard?