You should call Nintendo's support number. If you're in the US it's 800-255-3700. It's possible they may be able to repair it, or you could just buy another console. The refurbished consoles through Nintendo's store are a very good deal.
Your downloaded games are not lost forever. They are associated with your NNID, which can be transferred to another console with Nintendo Support's help.
I just got a Seagate 1.5TB for $50 and a y-cable from Amazon for like $5. It's a HUGE improvement convenience-wise over my old 320 GB that was the size of a brick and needed to be plugged into the wall. With any of these make sure you get the y-cable.