I'm no software expert, but perhaps my experience can help
I had the same problem with my system today that you did
with yours, with the same error message at the same point
in the boot up process. I looked at my BIOS boot
sequence, and everything was correct, so I wasted half a
day trying to figure out how to fix the boot sector.
Along the way, I found that my BIOS clock had been reset
to 00:00 on 1 Jan 2000.
In re-checking my BIOS settings, I finally discovered that
although the boot sequence was correct (floppy, CD, HDD),
the order in which the BIOS looked for HDD's had also been
altered (from 0,1,2 to 2,0,1). Drive 2 is a network
storage HDD, with no boot sector on it. I changed the
order so that BIOS would try to boot from the correct HDD
(0), and my system booted up with no further problems.
I was having a problem with the system when I initially
rebooted, but when I rebooted I also had a Verizon DSL
installation CD in my D drive. I don't know if the BIOS
alterations were caused by the system problem, the
installation CD, or both, but I'll never reboot or startup
again with any CD in the boot sequence CD drive.