Can't  reinstall MAC OS X on new iMac5 because no destination is listed

I have a new iMac5 (Intel Core 2 Duo) (now 3 months old) which has been giving me grief from the beginning. Within the first month, errors developed which could not be repaired by Disk Utility (applications would quit whenever I tried to print from them). Apple Support advised me to reinstall the operating system, which I did. Subsequently, I have experienced a lot of crashes, which Apple Support suggested were related to non-Apple software. I run Office for Mac 2004 (student edition) and am regularly using Entourage, Word and Excel.
Today I used the computer without any problems, and then left it for several hours. When I tried to use it again, it would not wake up or respond in any way. The flashing question mark appeared when I tried to restart it (I had to turn it off and restart it via the power button). I have run a hardware test via my installation disc - no problems found. However, when I run the disc utility, errors are found, but cannot be repaired. ("Error: The underlying task reported failure on exit".) Concluding that my only option would be to reinstall the operating system, I commenced the process, only to get stuck at the step of choosing a destination volume for installing the Mac OS X. No option is provided! (It is also strange that when I test for errors, the hard drive has changed its name to diskOs2.)
I accept that I probably cannot save any of the data (most is thankfully backed up), but am clearly frustrated that I am unable to reinstall the operating system.
I have read that Office for Mac 2004 can cause problems, but can it really be the cause of my current problems? Is there anything else I can do, or is it time to take it to an Apple repair centre?
Any advice would be much appreciated.
Many thanks,

Hi Merrilly,
How did you re-install the OS, an archive & install or an erase and install?
Do you have another bootable hard drive with the OS on it?
If not, how backed up are you?
I would recommend you do a zero out erase on the hard drive (only if you have all your data backed up).
Steps for zeroing the drive Disk Utility:
1. Insert your Mac OS X CD-ROM disc or Restore DVD disc, then restart the computer while holding the C key until you see the spinning gear.
2. Once started up from CD or DVD, choose Disk Utility from the Installer menu. (In Mac OS X 10.4 or later, you must select your language first.)

Important: Do not click Continue in the first screen of the Installer. If you do, you must restart from disc to access Disk Utility.
3. Choose the entire disk (top icon).
4. Choose erase tab.
5. Click on "Security Options"
6. Choose "write zeros".
7. Erase
This will take a bit of time because the computer is physically writing zeros to each block. Take a break, have some tea, read a book.
Then re-install 10.4.x from your disk and use the the 10.4.9 Combo Updater.
Remember to Verify Disk before update and repair permissions after update from /Applications/Utilities/Disk Utility.
If you still have issues call AppleCare, I doubt that Office 2004 is the issue but if you can test it a couple of days before installing Office, it would be good. Also, be sure you have the latest updates for Office.
Let us know.
-mj
[email protected]

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