Help! Lost all Data!

Problem with logging on:
Started up and window appeared asking for my user log on password. Computer seemed to recognize password but got this message: This user cannot log in at this time.
Password hint is correct, but can't log in after several tries. Call Apple Care, Steve has me try several logins, restarts holding C key, change password,etc. Nothing. Asks me if I have Fire Vault on but I can't remember. Tells me to do archive and install. I start first disc, run an errand, start disc 2. Still doesn't work.
Call Apple Care again, Shane has me try option/command/P/R, run Verify disk which shows all okay, log on as "root", etc. Then he has me log in 4 times and enter my master password. Now I can see my familiar desktop again. We check Mac HD and "Previous Folder" for my User folder but find that they are empty. He tells me all my data is lost.
After quizzing Shane to find out what caused this he mentioned that if Fire Vault is on then a different set of actions is performed or all data will be lost. Trying to log on 3 or 4 times and having it ask for the Master pw is an indication that Fire Vault is on. I entered Master pw and I was able to get to my desktop and dock, but all of the data is gone.
I have back ups for a few things--photos, some itune songs and some stuff from 2007 and prior--but everything else is gone. I know I should have it all backed up but I didn't.
I called the Apple Store and explained situation. He said, "Didn't Apple Care ask you to back up everything before you did an Archive and Install? They should have." But they didn't. I thought "Archive" meant that everything on my computer would be archived and still available.
So, what happened?
Is there anyway to retrieve any of my lost data?
Apple Care suggested Data Recover, Lazarus, etc. but said it was $$$. I asked if reading the logs would help pinpoint what happened, Shane said I'd need a "Software Engineer" and that no one at Apple Care would be able to understand the Log gobbledeegoop.
I pointed out that if, like he said, logging on 3-4 times and entering Master pw meant that File Vault was on, did he realize that and instruct me correctly so I wouldn't lose my data. I think he said that we had checked both Mac HD and "Previous Folder" and there was only an empty user file which meant data was gone.
Was I given bad advice from Apple Care? Has anyone been able to get Apple to pay for data retrieval?
Please help!

Ultimately, it is the user's responsibility to have a separate drive that holds a backup of important data from the internal drive. Apple's Time Machine (part of Leopard) makes it a simple +set it and forget it+ process. Other people use a cloning utility, such as Carbon Copy Cloner or SuperDuper to periodically make complete duplicates (clones) of their internal drive volume to an external drive. Some people even do both, to be double protected. It is unlikely, but not inconceivable, that both your internal drive and Time Machine drive would fail at exactly the same time, which is the purpose of the additional cloned backup.
You can lose your personal data on your internal drive for many reasons. The hard drive could fail. You could knock your iMac off your desk accidentally. Or your startup volume could just suffer from data corruption. With a Time Machine (or other type of) backup, it would be relatively simple to reformat your internal drive and restore the complete volume. If the internal drive had become faulty, you would have the drive replaced (under AppleCare) and then use the Time Machine backup to restore the complete volume. If the entire iMac had to be replaced due to an accident, that would not be pleasant, but you can use the Time Machine backup to restore your personal data to the replacement Mac; at least your old data would be there on the new Mac.
There are some utilities that can be used to retrieve data, as long as new data has not been written over the location of your old files on the hard drive. However, this will not work, if you had +File Vault+ turned on, because the data would have been encrypted. Here is one such utility
http://www.prosofteng.com/products/data_rescue.php
TechTool Pro from Micromat also has a data recovery tool.

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