Unable to boot / hard drive read error

I would recommend connecting the drive as a slave to a desktop.  You can use an adapter like this http://www.compuplus.com/insidepage.php3?id=1000197, and then try GetDataBack (www.runtime.org) to read the data.

what is active file recovery?

Just a comment for further reference:

You always have a partition, at least one. The formatting (the format command, or program if you wish) works on a partition, not on a "drive" per se. Windows can't allocate drive letters (like C:, D: etc) unless there are partitions. Many users have only one primary partition, "C:" in windowese, which often is made up to fill the entire drive.

The fact that a windows boot CD can't recognise the file system is a bit ominous. I'd suggest you try with at Linux Live CD (like knoppix) and if the same goes for that environment, you do need a data recovery software or external help (a data recovery business).
/RID

try this :  install Acronis workstation on a PC
connect the laptop drive as slave
try to backup the whole disk with Acronis, and ignore eventual errors

Active is a data recovery sofware.  It is not free, but there is a trial version, it will tell you what it can recover, but won't actually recover anything.

http://www.file-recovery.net/download.htm

I will look for an adapter to connect the hard drive to my PC.

what i need to understand is that why do i need a file recovery software?  when i plus the hard drive, wouldnt i be able to see all the folders on the hard drive?  

also how do i set the dive as slave?  

You may not need a recovery software, if your drive is readable by another operating system, as if you connect it to a working computer. You can also try booting the laptop with a  bootable CD of some sort, but you did try that and the drive's file system wasn't recognised, which is a bad sign. You could try with a Knoppix CD, it might work.

If you decide to hook the drive to a working system, you could use the secondary IDE (or SATA) channel, so the computer doesn't try to boot off your laptop HD, but uses the ordinary HD. Disconnect your optical drive or whatever sits on the secondary channel and link up your laptop HD there, temporarily. Then you won't need to set it as "slave".
/RID

Thanks Wizard.

I was able to run chkdisk -r after booting from BartPe which fixed a ton of orphnaned files and indexes.  I was not able to boot even after that but when used the universal boot cd, I was able to see my data on the hard drive.  I just conneted an external usb hard drive and moved all my files.

Initially I was getting a "read error" when I ran the diagnostics in BIOS but after the chkdisk, I was able to run the diagnostics but it dint find any problem.

At this point, I am still not able to boot but alteas I have my files!!!!!!!!!!!!!!!!!!!!

what happens now ? any errors? when does it stop?
you can try a repair install :  http://www.michaelstevenstech.com/XPrepairinstall.htm      

Thanks nobus.  I mistakenly called you wizard, sorry.