OS X :: Macbook Doesn't Boot - Blank Grey Screen, CDs Not Recognised

My Macbook will not boot up. I am now faced with a plain grey screen with no apple logo, chime sound or activity wheel appearing.

Like most Macbook users I know, I rarely go through the booting up process from day to day use unless the System Updater requires a restart, but this time there was a different reason for me restarting the system.

When I was expanding an archive with Stuffit Expander, the app froze up. I went and deleted the archive file knowing that it was corrupt, but I did this too soon before the app had a chance to close down properly. It became stuck as a process that couldn't be closed down. Its dock icon didn't have a 'Force Quit' menu option so, I chose to perform a restart.

The Macbook went through the startup process but took a very long time. (I guess after reading around the forums this was fsck attempting to scan and repair the potentially damaged hard drive). I mistakenly performed a hard reboot thinking the system had hung.

The second time, it displayed the apple logo and wheel for about 2 minutes before showing a circle with a line through it and no further activity. When I rebooted again the apple logo and wheel were displayed with the hard drive activity audibly in a repetitive on and off state. I left this for about 15 minutes before deciding to turn it off. At the present moment it starts up to a plain grey screen as mentioned at the beginning. I tried experimenting with removing the extra 2gb memory module but there was no difference with or without it. I tried resting the NVRAM with Option-Command-P-R but all I got back was the startup chime (i.e. the muted volume I had it at has now reset to the default level).

When Option is held down on booting, the mouse cursor is visible over the same blank grey screen. No volumes show up. I have selected the Finder Preferences option to hide all volumes from showing up on the desktop, but I doubt this would affect volumes from showing up on the boot up screen.

I have tried booting from the 10.4 CD that came with the Macbook and the 10.5 (retail) DVD. The 'C' or 'D' keys do not have any effect either.

I think my options now are either to try and obtain a firmware reset CD which might make it possible to recognise volumes again, or there's the possibility that I'll have to get a new hard drive. Can you suggest anything else I might be able to try?

On the subject of hard drives, if it turns out that the Macbook's hard drive is beyond repair and I need a new drive I only have a caddy for 3.5" PATA drives which I use for Time Machine. With an appropriate 2.5" SATA caddy is there any way I could access the filesystem in Windows? How else could I format the drive to the correct FS?