Update: I had my friend look at my 160GB Slim PS3 again, and apparently it's either the Blu-Ray drive itself that's malfunctioning, which will cost me $80 New on eBay, or it's the HDD, in which case I'm hoping just formatting it and re-installing the PS3 OS will fix the problem.
If it is the HDD and formatting/reinstalling doesn't work, I have my eyes set on a 500GB Western Digital for only $50 New on Amazon.
I just hope they're not both malfunctioning, I can't afford to spend $130 all at once.
A lot of PS3 users a while back reported a problem like this, and they said a new HDD fixed this. I can't vouch for them since I got a new hard drive while my games were still working, however. Did you try any of the recovery options from the PS3 Boot Menu?