While this may not yield different results, since you have 10.7.3 installed, have you tried Lion recovery mode, which is a reboot holding the command and R keys down. You can run Disk Utility from there, and do the disk repair. If that manages to complete normally, repair permissions while you're there. Then reboot normally.
I was able to get to Disk Utility in this manner, however still getting an error message. Disk Utility stopped reapiring "Macinstosh HD" Disk Utility can't repair this disk. Back up as many of yor files as possible, reformat the disk, and restore your backed up files.
I am guessig she is SOL, but at this point, I don't guess there is anyway to back up the disk information prior to restoring it/reinstalling OSX?
If you have another mac handy, and a firewire cable, you could try hooking it up in target disk mode, to see if the other system can read the hard drive to try and recover any files. This Apple note discusses target disk mode further: http://support.apple.com/kb/HT1661