How to fix an iPod Classic with a bad hard drive?
You can try to diagnose if the disk has a problem with the diagnostic mode.

To enter the diagnostic mode, press the folowing key for 5 seconds when the apple logo appears after a reset :

"back"
"select"


In the diagnotic mode, you can navigate in the menus with the back/next keys and launch a bunch of test, inluding hard drive tests.

If the tests shows a disk problem, the solution is to change the disk. Buying a second-hand ipod disk from someone who breack his screen won't normaly be very expensive.