If you can boot with a dvd, does that mean the dvd can write or ready to write the operating system in your hdd? If so, then your hdd is not dead yet. It's alive.
Of course you should buy the one with SSD. I don't think the price is too big compared to the other one. You should absolutely go for the SSD and make the whole 128 GB as your operating system drive. I truly believe that you will not regret it.