Another NVidia graphics problem (8800 GS) - late spring 08 imac

Question

I have a spring 08 aluminum imac (24", 3.06GHz, 4GB RAM, 10.5.7)
The graphics card is an NVIDIA GeForce 8800 GS w/ 512 MB VRAM
I get sporadic strange graphics failures seemingly at random intervals. They started around the time I upgraded to 10.5.5 (or maybe 10.4.4... can't recall) back in December, but that could be coincidence. They do not seem to be tied to use of any application or user action. Since they started in December, I have gone months without them, and had them occur 5 minutes apart. They've hit me a half dozen times in the last 3 days.
Here's what happens:
The screen appears to flash once
The computer becomes unresponsive (usually w/ spinning beachball)
If activity monitor is running, the CPU stays at a low use %
Sometimes the dock icons pixelate and/or turn yellow
Occasionally the desktop icons seem corrupt/pixelated
The desktop background is unaffected. If iTunes is playing it is unaffected. The mouse moves the pointer with no sluggishness or lag, though clicking is usually ineffective (can have either standard pointer or spinning ball)
Using iStat, the GPU immediately after a reboot is ~52 deg and the GPU Diode is 59 Deg. The top of the machine is very warm. I can hold my hand there indefinitely, but any hotter and I would not be able to. The CPU fan is running at 1300rpm, hard drive at 1500, optical drive at 700.
Tech tool Pro 5 video memory test shows no problems.
Sometimes the machine appears to recover somewhat, but then I get another "flash" and the symptoms repeat.
If I pull up console, I get a host of error messages along the lines of:
7/14/09 8:41:18 PM kernel NVDA(OpenGL): Channel exception! status = 0xffff info32 = 0xd = GR: SW Notify Error
7/14/09 8:41:18 PM kernel 0000000c
7/14/09 8:41:18 PM kernel 00200000 00008297 00000472 00000000
7/14/09 8:41:18 PM kernel 0000047e 00001b0c 1000f010 00000003
7/14/09 8:41:18 PM kernel 00000000 00000000 00000000
7/14/09 8:41:30 PM kernel NVChannel(Display): Graphics channel timeout!
7/14/09 8:41:42 PM kernel NVChannel(OpenGL): Graphics channel timeout!
7/14/09 8:41:54 PM kernel NVChannel(Display): Graphics channel timeout!
Typically, the only recourse is a hard reboot holding the power button.
I fear I screwed myself, as even though the problem started in December, it had gone "dormant" in early spring, and I let my 1 year warranty go past without getting extended applecare. A call to apple care yielded only a "bring it to a genius bar and they'll have a look" but given the sporadic nature of the problem, I doubt I'd be "lucky" enough to get the error.
Can anyone offer advice as to:
What the heck is going on
Whether this is a common enough problem that I can badger Apple into fixing it out of warranty
If there is anything I can do to remedy the problem myself
What I can expect to pay for a repair

Answer 1

Typo - should read : "They started around the time I upgraded to 10.5.5 (or maybe 10.5.4... can't recall)"