I had this exact same problem. The Apple Support man (what a savior) saved my bacon. I hope I'm not too late and you are still searching for answers. Here's what to do:
- As long as the computer is on, it will accept a disk, so turn it on, insert the install disk, then reboot, while holding the C key (or Option, then select the dvd)
- You should see a window beginning to guide you through the install process for OSX. Ignore this, and click the options button in the lower left corner of that window.
- Choose "Archive and install". This will archive your current installation of OSX, and install a new one. When everything is up and running again, you should still have all of your settings, apps, and personal files in their locations. There will be a folder named "Previous Install" or something similar in your root folder I believe. You can just delete this whole folder, and all should be well!
Forgive me if these instructions are inaccurate, this happened to me at the beginning of september, and i don't exactly remember the process.
Good luck.
EDIT: you might try taking the battery out and making sure the drive is fully pushed into its cave.
I just saw the part about disk utility not being able to see the drive, and I am sorry for that. mine showed up, and I was able to verify it, repair it, and in the end, reinstall the os while keeping my files on the drive.
ps: you wouldn't happen to have installed Crossover recently? I had, and the next time I tried to boot my macbook, this happened.