Problem with Full startup disk: finder not responding

Dear all,

I have a problem with my macbook (OS X Snow Leopard) that just occurred today:

I ran a few itunes updates (amongst others a 1.6 GB navi software) and my startup disk turned out to be almost full. I tried to solve the problem by shifting movies and music to an external hard drive but suddenly my mac froze and I had to restart.

Since this moment, when logging in a am informed that I need to free disk space (Start up disk is full) but this is not possible because my dock is missing and all I get is a blank desktop (no clock, WLAN, Battery symbols in the upper right corner). All I can do is access safari and Qucktime over the recent items list and open preferences (They can still play movies and surf the web). The apple Logo in the upper left corner is still there, allowing access to the basic commands like shut down, log out, etc.

I tried rebooting with the OSX disc to access disk utility, ran disk restore and disk verify. Everything seems to be allright, I just can't erase data and free up space. The terminal commands don't work either, all I'm being given is this command line: -bash-3.2#. Any command I enter is "unknown".

Do you guys have any idea how to fix this problem?

Thanks for your help

Cheers
Tim