2009 iMac 24" GeForce 120 problems after 10.6.7 upgrade

Hi all,
I've read a lot of threads about iMac graphic problems on these boards, but I haven't really found anything here that sounds like my problem.
Several weeks ago, I upgraded my early 2009 iMac to 10.6.7. Up until this point, I have had zero problems with this machine.  However, since the upgrade, I have had multiple hard freezes each week, especially when watching videos on Netflix streaming.  I upgraded flash to the most recent version, but have since started having problems while using only core programs (Safari while browsing Facebook, listening to music in iTunes).
It starts with several blocks (maybe 100px by 50px, in a "Tetris" pattern) on the screen that display text from another portion of the screen. They are not static distortions. When I scroll the page, text and UI chrome will show up in this blocky "mirror" of another part of the screen.  When I command-tab to another program, the defects disappear, but then return when I switch back.  At certain points, the screen begins to flash, and flicker with half of the screen going black.  While this happens, I can move the cursor with the mouse, but cannot click on anything.  I am able to ssh into the iMac while it's having one of it's seizures and run programs (top, ps, grep, tail, shutdown, etc.) from the command line without problems.
So, do you all think that this is a hardware failure (bad graphics or logic board) or _hopefully_ just a driver problem? Unfortunately my AppleCare has expired :-(
Thanks for your input.
Edit -- I have not had any kernel panics (or atleast the kernel panic "Please restart" page), but I do find this repeated in the console
Jun  6 16:17:53 max kernel[0]: NVDA(OpenGL): Channel exception! exception type = 0x6 = Fifo: Parse Error
Jun  6 16:17:53: --- last message repeated 1 time ---
Jun  6 16:17:53 max kernel[0]: 00000069
Message was edited by: jasse17

Try run Apple Hardware Test on your system, also run disk utility on your hard drive to repair it, repair permission too.  http://support.apple.com/kb/ht1509     http://support.apple.com/kb/TS1417

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