Macbook and the flashing folder w/question mark

My daughter owns a 2007 13 inch macbook that recently wouldn't boot and instead showed the dreaded folder w/ flashing question mark. We tried a number of things that I found on threads here but not much luck in getting it booted. The good news is that she has a time machine backup that is 2 weeks old so she will lose some data but most should be salvaged. My question at this point is what is our next step? Replace the hard drive? She has successfully removed the old drive and reseated it without any success but she now knows the drill and can easily pull it and place a new drive into the bay. I am ignorant of what needs to be done at that point. Is there a link to a page that might tell us exactly what to do once the new drive is in? I am guessing that the startup disc may find the new drive and help format but I would love to give her a good resource on a step by step. Also, where does time machine fit into this process? And how does the OS get put back on? I think she has Lion from itunes and now I wonder how that is going to work too.

Can this drive be replace with an SSD? Would that be worthwhile? She is planning on buying a new computer soon but it would be great to have a backup and I wonder if the ssd would speed it up? Otherwise, are the drives for these standard? What do I need to look for in choosing the right drive?

Thanks for any help.

Echomango

 

Thanks so much for this response and links Tander. Very helpful. It seems that any 2.5" inch drive will work? I worry about compatibility. Maybe its been too long since I installed a hard drive. (back in my windows days, bless macs) Does an ssd use the same connection? I think the drive that went kaput was only 60 or 80 GB and it might not be such a cost factor for that small a drive. Am I right about that? Are there other reasons you would steer clear of the ssd?

Many thanks

Echo

 

Thanks Tander. Very helpful. Have bought a ssd and will see how it works. I wish I could put one in my 2006 imac!