Can't boot into desktop

Question

Hi, I own an iMac 20-in early 2008. I've installed Mavericks (10.9.5) on it and it's been running perfectly being used by our accounting person. One day the computer boot up and the usual chime & apple logo shows up. The loading circle shows up indicating that it's loading all the system files etc, then when it disappears just as it's about to go to the desktop view it's stuck. The Apple logo is still there, but the display slightly dims (kinda like when colorsync/calibration kicks in).
I tried Verbose Mode (Command + V) and it loads all the kernels without a problem. Once it loaded, back to the same grey screen with Apple logo and it just stuck there.
I've tried booting into safe mode and it works fine so it's probably not hardware.
I can't start Diagnostic Test on it since I don't have the CD anymore.
So since most of the files are store on a server, I did a target disk mode, backed up some small amount of data and reformated the computer using a USB stick loaded with a freshly downloaded Mavericks.
Installation went on without a problem, but as soon as it restarted, it did the same thing again.
Here's what I've done so far:
Reset PRAM (cmd + opt + P + R buttons) 3 consecutive times
I booted using the USB stick and used disk utility to repair permission as well as repair disk. Not much to repair there since it's a freshly installed system
I did single user mode and did the /sbin/fsck -fy command twice until it says the HD is ok.
Took off the power cable to reset SMC (or PMU whatever that thing is called now)
I'm baffled. Since it's been running since 2008, could it be the PRAM battery? I know in my old powermac the logic board has that... but I'm not sure about the new intel Macs.
I live in a country where there's no Apple Store so I'd really want to make sure I've tried everything before giving the machine to an authorized service center where it will sit 3 weeks if I can kinda pinpoint what's wrong and bring it to a local shop to change parts real quick if needed.
It's out of warranty (obviously) without any Applecare.
Anyone might have a clue to what's wrong with this machine?
Thanks very much.

Answer 1

Reinstalling OS X Without Erasing the Drive
Boot to the Recovery HD: Restart the computer and after the chime press and hold down the COMMAND and R keys until the menu screen appears. Alternatively, restart the computer and after the chime press and hold down the OPTION key until the boot manager screen appears. Select the Recovery HD and click on the downward pointing arrow button.
Repair the Hard Drive and Permissions: Upon startup select Disk Utility from the main menu. Repair the Hard Drive and Permissions as follows.
When the recovery menu appears select Disk Utility. After DU loads select your hard drive entry (mfgr.'s ID and drive size) from the the left side list.  In the DU status area you will see an entry for the S.M.A.R.T. status of the hard drive.  If it does not say "Verified" then the hard drive is failing or failed. (SMART status is not reported on external Firewire or USB drives.) If the drive is "Verified" then select your OS X volume from the list on the left (sub-entry below the drive entry,) click on the First Aid tab, then click on the Repair Disk button. If DU reports any errors that have been fixed, then re-run Repair Disk until no errors are reported. If no errors are reported click on the Repair Permissions button. Wait until the operation completes, then quit DU and return to the main menu.
Reinstall OS X: Select Reinstall OS X and click on the Continue button.
Note: You will need an active Internet connection. I suggest using Ethernet if possible because it is three times faster than wireless.
Also see:
Reinstall OS X Without Erasing the Drive
Choose the version you have installed now:
OS X Mavericks- Reinstall OS X
     Note: You will need an active Internet connection. I suggest using Ethernet
                 if possible because it is three times faster than wireless.