Looks like you need to replace the HDD. An alternative way is always try to repair it yourself. There are Mac Repair Guidesthat show how to open an Macbook. Watch out for the ribbon cables,those tear easily. Replacement parts are usually available on Ebay.There are third party services that can do it for you, like Mac Repair NYC.
It sounds like your MacBook can not find the system software to boot up. This is often a sign of a hard drive going bad. Try booting from the CD/DVD that came with your MacBook and running Disk Utility.
You can also refer to this article:
http://support.apple.com/kb/TS1440?viewlocale=en_US
Good luck!
I hope this helps.
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