Thanks Ancient_One. I see you fixed yours in December, so if it is still going, that's pretty good for a repair job.
I'm considering all options, but leaning towards getting Sony to repair it. I'm aware that Sony will reformat the HDD, but I still have the original 60Gb HDD I removed when I upgraded it. I plan to swap the HDDs back so Sony reformats the old one instead. Then when I get the PS3 back I'll swap them back again.
If that doesn't work, I do have a backup on an external drive I can restore... but it's 4 months old. But that's better than losing the lot.
Just waiting to hear from Sony about the cost.