Thanks for everyone's suggestions since my last post in this thread. I haven't had time to try out the suggestions yet, but thought I'd clarify some information while I have a minute:
TrueCrypt gives me this error along with the following information:


It can't be just TrueCrypt because in preparation for this I was trying to split my single partitioned 120GB hard drive into two partitions using Acronis Disk Director Suite but it told me it couldn't make a partition because of a bad block.
I've run the really long pre-boot chkdsk /r at least 3 times now and every time it says nothing is wrong.
I'll try out some of the free suggestions. SpinRite for example is $90, and I'm not sure it would solve my problem--Not worth it just to try out TrueCrypt.