Well... This is really annoying!
I thought that the problem with my Mac was a result of some driver, or program which foobared my mac.
So I backed up my mac, important files and folders (although I forgot my iPhoto photos folder!!!) and I did a Backup with Apple's backup utility.
I specified that the utility should also backup iPhoto, so I thought all would be OK (since I also though that I manually backed up that folder as well).

I did a complete format of my hard drive (zeroed out the disk), and did a fresh install of the operating system.
This did not fix the problem, but at least I can boot with safe mode. Now I decided to restore my important files (word docs, excel, photos, music, etc).
Everything was there...everything except my photos!!! WTF? I looked left, I looked right...nothing..no photos!

This is frikkin' annoying! Now I had saved and shared some of my favorites with the world (on my site and on flickr) so not all is lost forever. However, I did lose photos, and I did lose the higher resolution equivalents of what is on my site and on flickr! This did teach me one thing though...I won't be trusting Apple's backup utility in the future for photos. It works well for calendar and addressbook and a few other things...but not photos or music.

I think I will start saving up for a new mac now...