I repaired a system with a similar issue last night. DiskWarrior 2 found the drive and was able to repair the damaged directories, even though the drive did not show up on boot. After that TechTool Pro 3.x fixed several things, and Norton repaired the rest. After that, everything worked properly. I also ran the software update control panel, and updated pretty much everything it found (the owner doesn't have an iPod, so no point in updating that).
It was a good thing that the problem happened over the weekend, since the owner works from home two days a week. If this had happened on either of those days, she would have been in a worse place.
I did work for her about a year ago, updating the OS as well as increasing the RAM inside the computer and running all the utilities on the system. In case you are wondering, it's a G3 350MHz Blue and White with the original 6GB hard drive and now has 640MB of RAM. I installed both OS 9.2.1 back when I had it last year, as well as OS X 10.1. Last night I updated it to 9.2.2 and 10.1.4.