Sounds more as though the HD has gone down, which does happen. Best thing is to test it in another machine, if its just a few bad sectors then it should be sortable as long as the sectors arn't too critical, though it does sound likely they are on the boot sector.
Ideally you need 2 operating systems to ensure that if one gives up the ghost you can still boot your computer to sort out the first OS. Don't forget that you can always use a Linux (Knoppix etc) bot CD to check your HD.
As for upgrading Saab Dastard is on the mark. Compaq use non-standard components. Then again even just keeping the case (though compaq seem to insist on using the smallest case possible) HD etc can make an upgrade reasonably cheap.
Depends of course on how fast your compaq was and how fast you want it to be. You can happily get a good Athlon or P4 Mobo for 20 odd quid with graphics and audio on board. Just add a processor for £20 and some memory...
I always use scan.co.uk for my hardware but I don't know whether they stock much lower range eqpt.
Dabs is good too but if you're looking at a lowish end upgrade then your local computer fair might be the best place.