ATI 10 "A disk read error occurred"

Hi to everyone
I have a dell inspiron 1525 with windows vista installed
with Acronis true image home ver. 10 build 4,942.
I also have a Acronis bootable media builder disk that was made when installed.
I also have my original windows installation disk.
I also bought MustangPEBuilder 2
I made a WAIK ISO disk

I hope i covered everything, of here is the problem.

I booted laptop and got a message "a disk read error occurred press ctrl+alt+del to start".
I started laptop with windows Cd.
Clicked on repair my computer.
no files came up in the system recovery options under operating system.
clicked load drivers and opened into a windows file directory named "sources" under boot(x:) I believe this is the smaller partion that Acronis made when installed.
I also saw a c: drive, click on it it did nothing but shade the windows box for a second or two.
It showed my d: drive with windows disk and e:,F: with both being usb cards.
I did a startup repair. clicked repair details and said it fixed 1 error
rebooted with same error

So went back to the choose recovery tool window
At the command prompt did the bootrec /fixmbr and fixboot.
Answer: the operation completed successfully. now that was done on the x:drive
rebooted with same error
The waik ISO I believe needs to be loaded on c: drive but can't. I got it to open with the start dc file at command prompt but got errors when tried to install.
At command prompt trying to get to the c: drive give me an error " the file or directory is corrupted and unreadable.

I can still get into ATI, the f11 comes up at boot or I can still use the media build disk.
So with that I backed up the c: drive last night (16 hours) to my external drive. I don't think I have a image backed up because I have other files on external and think I would have had to erase that partion. I also did a Acronis report I'll try to attach.
Any help please