Will one 'C' grade due to health issues ruin my chances of admission into a top grad school? I am in the third year of my undergraduate degree now, and in the process of applying for Graduate schools and Med schools. I have a burning questions about a creepy "C" in my transcript. 

To summarize my story: I was recovering from a biopsy operation back then. Though I was advised to take one semester off to rest physically and mentally (I was extremely paranoid waiting for the pathology report, and luckily it came back benign), I still decided to take all the courses and the heavy research that I had started before. I performed so badly that semester that I received a C. That is like the most embarrassing element in my transcript. 

Some told me that such a bad grade is a disadvantage for admissions. Do I still have a chance to make it to top grad and med schools?  With extra effort (I have managed to pull up my GPA to 3.8 now, I have been on the Dean's list for some semesters, have 3 publications, and 2 poster presentations at symposium, my GRE and MCAT are good too), can I cover that ugly spot?
You have shown that you have overcome great adversity and still achieved great results - this says a lot of positives about your character - of resilience and perseverance - two attributes that are critical for any graduate studies.  You had a cancer scare and still passed the subject despite the medical tests and the very justified anxiety.

Maybe, it is not an "ugly spot", but that C, and subsequent successes are a reminder of how much strength and tenacity you have shown.