I just got the E68 error which indicates hard drive failure.  I just got my 120gb back in November so the hard drive isn't old.

I disconnected the hard drive and waited about 20 seconds and plugged it back in and it turned on fine... but now I'm pretty paranoid.  I have the 360 plugged into a surge protector.  Should I plug it into the wall directly?  Any other tips or things I can do to (hopefully) keep it from happening again?

*bites fingernails*

The best thing you can do is NOT worry lol As you said it's working fine and most people who've had this issue end up getting it fixed by just removing the HDD and putting it back on.

you are fucked, dial 911, scream.

it's fine. i would say plug the 360 into a wall outlet instead of a power surge because the 360 already has a power surge in it. it's fine i've had one of those before. i actually had it like two times because the hard drive isn't plugged in directly.

i've actually got the E68 error :( i was pissed about it. i lost all of my data to my games. i had to argue with the guy for them to send me another hard drive. i think microsoft planned it for me as i got E74 error the same week and the hard drive could have broke the same day the 360 broke. i waited like two days and went to my friend's house to find out have E68 error.

don't be nervous about your hard drive breaking because i've had that happen to me. i thought o no my hard drive broke again?!? plugged it back and it was fine.

Buy  a memory card and put your saves on that just in case.  Until then, just use it until it's unusable.