Yet again, here is but one more example of why Time Machine is a weak backup solution for the Mac. Not only weak, but downright dangerous.
Yes, it LOOKS simple and attractive when you first turn it on. So easy, just one switch! But the devil is in trying to get your data BACK once you've had a crash.
For some, it works. For others, well - read the original post.
To the original poster:
I suggest when you get things up and running again, that you stop using Time Machine and get ahold of CarbonCopyCloner. You'll have to set it up (not all that difficult), and you also have to remember to run it periodically (it's a "manually-launched" backup application, that only does a backup when you tell it to do one).
But if you do this, you will end up with a fully-bootable "clone" of your internal hard drive with files easily accessible in Finder format.
If for some reason the Mac won't boot from the internal, or even if you want to regular maintenence on the internal, just press the power-on button, hold down the "option" key, and the Startup Manager will let you boot from your backup drive.
CarbonCopyCloner is freeware - just download and use it.
And I make an absolute guarantee that the NEXT time you have problems with the internal drive, CCC will make repair or recovery far, FAR easier.