Files Disappeared on Wall Street , Need Advice, And on External Hard Drives

My memory was low so I was in the process of archiving files when some of the folders in my Desktop documents folder disappeared. I had begun transferring files into Toast when it happened. The computer had previously been in sleep mode during the night.
When I searched for the contents using Find File. it listed them in the same place or as unavailable. I restarted, turned off extensions I didn't need, transferred some of the files still showing on my HD onto my USB JumpDrive for temp storage and rebuilt the desktop. When I ran Norton Disk Doctor, it found problems with the Catalog B-tree, which makes sense since it's the "data structure where files are stored on your disk." Norton was able to fix some of the issues, but not all, and was not able to finish scanning the disk. I ran it again, with the same results and also checked out UnErase.
When I rebooted without the Norton Disk, some of the missing files reappeared, with the exception of the folder I was trying to copy at the time. My tech repair guy says that due to corruption, I should wipe my HD to zero and reinstall everything, with additional GB hard drive space, of course. What do you guys think? Is this the best course of action? And if so, how pressing is it to do so immediately, since my computer had been running for quite some time without trouble on less than optimum memory space. Any tips on external hard drives that are compatible with the Wall Street?
I currently have 247 MB available. Luckily, I had previously made a backup of everything except my Outlook Express identity folder, for my e-mail, which is too large to back up to CD. So I'm hoping this will not crash in the interim!
Your replies are much appreciated!

Hi Leslie,
It would be helpful to know a bit more about the computer, such as the size of the drive you have and the OS you are running. I believe general guidelines are to not fill your drive to more than 90% capacity.
Norton Utilities receives some bad rap on this forum, but sometimes it's all you have (Diskwarrior and TechTool are usually recommended). With NU you particularly have to be careful to use versions that are at least the same generation as the OS you are using. I usually go with Disk First Aid as a first shot since it's made by the people who made the computer.
Assuming you're okay with the situation about the recovered files then I'd say starting with a clean drive would be good. Keep in mind though that the files will be gone for good. I don't know if you need to really zero the drive, just reinitialize ("erase") it. I'd also run some utility to check the integrity of the drive to see whether the problem was due to the drive starting to fail. You might be able to continue to work with it as-is but it would be nice to know why your drive got corrupted in the first place. At least clear up some room. You might also want to check on the fragmentation status and at least do a clean OS install just in case some of those files are on their way out too.
I don't know the Wall Street model myself, but I see it is a G3 powerbook. If it has USB or Firewire capability then I'd get an external Firewire drive (USB would be very slow but would still work). My backup procedure is to have an external HD the same size as my internal one. Then I can just drag the internal to the external once a week and let it copy overnight. That way I don't have to be bothered with copying select files and if the OS files get messed up I don't have to re-customize my preferences, control panels and extensions (I'm still an OS 9 man!)
Brian

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