Your forks are definately toast, you may have two options. Their are one maybe two companies that are still doing re-builds on these older Rock Shox, you might try posting something on the Vintage board, they may be able to point you to one of these companies. If this is an older threaded fork, with a 1 inch steerer tube this may be your only option. ( I can't see the top of the fork tube in the picture, to let you know)
The second option is a new fork, if this frame happens to have a 1 1/8 tube, you can move to a 1 1/8 threadless fork. You would need a new threadless stem as well. This may start to become cost prohibitive on a bike this old, alot depends on the size of the steering tube. Post up some pictures that show the top of the fork coming out of the steerer tube and we can help you out. That period of bikes were mostly threaded headsets, but if not you have some nice options for new forks and stems. This time of year, the internet sights are probably blowing out the 2009's and maybe even a left over 2008 fork and you might pick up a deal. Post up another picture and you will get a better assessment.
Happy Holidays!
MadDuc916