Is there a fix for the blinking folder icon at start-up?

I have what seems like a hard drive read issue, but I'm no hardware expert, so i wanted to explain my situation in the hopes that someone might be able to help out.

A few days ago, when I woke my iMac (21" purchased in 2007), the wait cursor started spinning and I could hear something mechanical spinning inside. There was some friction. This continued for some time--I couldn't force quit or anything--so I shut it down. When I rebooted, I heard the sound again and the screen remained gray.

I unplugged the external hardrive I use for time machine and repeated. This time I also got the gray screen, but on top of it was the blinking icon of a folder with a question mark in its center. Within the machine I could hear that mechanical spinning-with-friction sound. I did another hard reboot and was able to login and use my computer normally. I even plugged in the external hard drive and did a time machine backup.

Since then, I eject the TM HD before I sleep my machine and about half the time it wakes fine. The rest of the time, though, I end up with the never-wait cursor and, after I do a hard reboot, the blinking folder with the question mark. I typically have to reboot 1-3 times until it takes me to the login screen.

This has only been happening a few days, but it seems that it only occurs when my machine has been asleep for quite a while--say, overnight. Since it started out of the blue, I'm worried about things getting worse quickly and want to nip things in the bud if I can.

Does anyone have any ideas what could be going on? My machine and the TM backup have been sitting in the same place for months, so I don't see how they could have been jostled. (This was the first thing that came to mind when I heard that spinning sound.)

Please let me know if you need any additional information or if you have any ideas as to what could be causing this.

Thank you.