Help! My MBP crashed on system update.

This is regarding my MacBook Pro 17" late 2009 edition running OSX 10.7.2

Yesterday while running a routine Software Update which included the latest iTunes update and an OSX update, my MBP was stalled during the last steps of the installation process (something like copying files to right locations..). I waited for hours and ultimately hit the power button. Since then my MBP only restarts to the stage of apple logo appearing on grey followed by the spinning cartwheel which seems to go on forever. No blue/ login screen appears even after I waited for over an hour.

I fixed the disk permissions, repaired the hdd using disk utility from my original install disk but still no luck.

I even tried to reinstall macosx but it presents the hdd as unavailable. Could it be because I only have about 70gb free on this 500gig hdd?

What is the best course for me to get my MBP up and running again, please help!

 

Thanks negativezero, unfortunately don't have a time machine backup since my TC stopped working a few months ago.

Will I be able to mount my MBP via FireWire on my old G4 PowerBook. That way I can backup my home folder to clear way for a system reinstall?