My Mac is dying - what's the best course of action?

My computer has been running poorly for months. Today I tried to run Disk Utility and I was informed my hard drive was failing and DU couldn't be run.
Technically, I can't really afford any action right now but clearly I need to do something. In your opinion, is it better to scour Craigslist for another Mac, or bring it to a repair shop and see what can be done? I would need to replace the hard drive of course, but I would also need to replace the CD Rom reader because that stopped working awhile back.
I have a 2006 Intel iMac running 10.4.8.

Hi,
The first thing you should do, if you haven' already... is make a Clone Backup to preserve all your date...

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