I would not assume the drive has issues just yet. I don't have time to answer this well, so hopefully somebody else can come along with help.
What I'll say is this: the best way to store archive copies of DVDs on a disc is as ISO files. You can create ISO's from your individual files, if you ripped VOB/IFO/BUP files off the disc. Use ImgBurn, and use BUILD mode to save to a new image file.
It might just be DVD SHrink having a problem -- that's not the best software for ripping, copying, playing, authoring, etc -- as some people try to use it for. That's not its main purpose.
If you do ever lose the hard drive, know that you'll lose your whole collection. On the other hand, a bad disc is just a disc -- not all of the discs at once. Maybe not the wisest idea. It would be a tad better if you had all the files saved twice, using two hard drives (a main storage, and a backup).
The only other problem may be if you didn't rip/copy those discs right, and your files are not "bad" as much as "incomplete".
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