if the sound isn't occurring when you switch the wheel out then it's probably a hub that either needs an overhaul or is shot. if it's a 'clicking' sound that happens intermittently, it's probably the hub, but if it's a clunk and you can really feel it as you're riding it could be your fork/headset. (i had a hub go on me a few years ago and it starts with a clicking that gradually gets worse. eventually the wheel won't spin freely or smoothly)

the headset races (if this is the issue) are not that fragile (i.e. the loose bearings won't damage them), but i would recommend overhauling the entire headset and repacking it with new bearings. they are probably old and pitted, especially if the race system is running loose. what type of headset do you have? sealed cartridge or loose packed?

the other thing you may want to watch out for if you've been running loose is stripping on the lock nut on the headset assembly (the top most nut) if the threads are smashed or stripped, you'll need a new nut.

there's a great tutorial on the parktools website on overhauling a headset: http://www.parktool.com/repair/readhowto.asp?id=127 ignore the bit about knocking out the cups. you don't need to do this and the tool to press them back in is extremely expensive.

(use pleeenty of grease, and again, new bearings or cartridges). may be a lbs thing if you're not familiar.