My harddrive is messed up and only 60 blocks are usable, can I still use a modchip?

yup

Yes,
Also with a mod chip you could replace your hard drive so that it is working again.

kinda butting in on this topic, but my hard drive is currently frozen (i think it;s unfrozen, but my PC's BIOS make it frozen when i run atapwd. will a modchip like the x3 allow me to lock my hard drive, or boot the xbox even though the hard drive is unlocked?

Any modchip will allow you to boot a locked or unlocked hard drive (of course, if the drive is locked, it must be locked using the key from the same mobo's eeprom). And ConfigMagic is the easiest way to lock your hard drive. Locking your drive is safer with ConfigMagic because if your mobo ever dies, then you can still unlock your drive (for use with anther mobo) using a master password (or just saving a backup copy of your current mobo's eeprom).