This just happed to me. Before I left on a trip my computer worked fine. The HD was physically ok, but every time I launched the disk utility the computer would freeze completely. On the way back from a trip, on the plane my computer started to freeze while booting. I cloned my computer before I left on my trip, so I was ok. I launched from my external drive, copied off the documents I wrote while at the conference, and then erased my PB's HD, and cloned the external drive back. It solved my freezing issues. A reinstall might do the same. If you can boot from an external HD or from the CD, then it is likely not a hardware issue, unless it is the HD or its controller. IJ Reilly is right, if you reinstall and your computer crashes, you compound your data recovery problems. If you have a friend with a mac, boot into
target disk mode and attempt to recover your data.
IJ Reilly is adamant about people not reinstalling their OS, and most of the time this is true. His argument is that Apple's newest OS is extremely robust and good at marinating it's self. There are significant advantages to never actually doing anything other than upgrading the OS. For instance, some drivers that were good up to os 10.2 stopped working if you did a fresh install of 10.3, but kept working if you did an upgrade. For me a virgin install reminds me of the tools I need, have and use regularly. I usually junk all of the apps and media I don’t use regularly.
If given the chance of a clean install and an archive and install, I would choose the clean install- if all of your vital data has been recovered. In any case, I hope you get your computer fixed, and you might think about getting an external FW HD to eventually put a bootable clone on. It can be a life-saver.
[The likely cause of my freezing was croupted data on the HD caused by signifant exposure to EMR at the airport. X-rays do little damage, if any to laptops, but the magnetic fields created by the devices can be huge! My computer was passed back and forth a number times- for what ever reason.]