Early 2008 iMac won't start up. Goes to apple logo and freezes

Early 2008 iMac won't start up. Goes to the apple logo but it has a couple of yellowish stripes on it. Then the whole screen gets the stripes and it freezes. Does the same thing using another start up drive or a recovery drive. Running Maverics. Help!

I work at an Authorized Apple Reseller and we are having the same problem with one of our showfloor models.
Model: iMac 21.5" (Brand New Core i3, etc)
Problem Description: When you press the power button, you hear the Apple chime and the screen turns on. Instead of booting normally, the screen shows the Apple logo, a spinning 'loading' circle (I call it a ferris wheel), and a loading bar below that. Typically the loading bar is for an EFI Firmware update, but I don't remember updating the iMac recently. Anyways, the loading bar moves once, starts over, and then the iMac shuts down.
Possibly Related Issue: Several days leading up to this issue, the computer was very noisy. It sounded like the hard drive was working overtime on indexing or something, but it ran fine and spotlight wasn't even indexing at all. I walked by it yesterday and noticed it wasn't on. I pushed the power button, and the problem it has now started.
I will keep searching the forum for a solution, but I have a feeling this is a hardware issue that will need to be serviced by Apple.
Sidenote: If anyone has any experience contacting apple as an Apple Reseller about repairing a computer before the warranty starts, any advice would be greatly appreciated

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