Time Machine has stopped working, HD errors

Time Machine has suddenly stopped working on my 2008 24" iMac. I have tried two separate drives, but neither work.
When I try and verify my internal HDD it comes back with a number of errors, and it has started to click recently. I expect the two must be linked!
I can't find my install disk to try to repair the main disk and some advice says that might be a bad thing to do anyway if the drive is physically damaged.
I have a full TM back up from two days ago, and I use Carbon Copy Cloner to backup my iPhoto/iTunes library separately.
My questions are:
1. What are the issues with running the iMac without TM until the disk finally dies? If it lasts, say, 6 months, can I just restore my Oct 2011 TM back up and rebuild my media libraries from CCC backups or will I lose something else?
2. Does anyone know the approx cost of getting Apple to replace the HDD? I have seen the online guides to doing it myself and don't really fancy trying!

Time Machine has suddenly stopped working on my 2008 24" iMac. I have tried two separate drives, but neither work.
When I try and verify my internal HDD it comes back with a number of errors, and it has started to click recently. I expect the two must be linked!
I can't find my install disk to try to repair the main disk and some advice says that might be a bad thing to do anyway if the drive is physically damaged.
I have a full TM back up from two days ago, and I use Carbon Copy Cloner to backup my iPhoto/iTunes library separately.
My questions are:
1. What are the issues with running the iMac without TM until the disk finally dies? If it lasts, say, 6 months, can I just restore my Oct 2011 TM back up and rebuild my media libraries from CCC backups or will I lose something else?
2. Does anyone know the approx cost of getting Apple to replace the HDD? I have seen the online guides to doing it myself and don't really fancy trying!

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    May 27 08:29:55 Toms-iMac com.apple.backupd[4307]: Copy stage failed with error:11
    May 27 08:30:00 Toms-iMac com.apple.backupd[4307]: Backup failed with error: 11
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