Flashing Question Mark & Won't Boot

My Mac Mini (Core Duo 1.67) will not boot, which is annoying considering it is under two weeks old.
I get a flashing question mark on a folder icon on startup and it progresses no further.
It does however start from CD unaided (without having to C-poweron).
Apple Hardware Tools (D-poweron) says everything is OK.
The reinstall CD starts and I can get to the part that asks me to install OS X, and/or use the disk checker. Both the installer and disk checker tell me the machine has no hard drive - it just doesn't see a hard drive as present.
Zapping the cmos (alt-command-p-r) didn't help.
I then gave up and handed it to the office IT people. They took the drive out (it appears to be a standard 2.5" 60GB fujitsu SATA hard drive, also used by PC laptops) and shoved it in a PC. The PC detects the drive and can view the contents (via low level disk diagnostic software; Windows XP itself just says "I don't do Mac filesystems, want me to format this for you so I can use it?")
IT guys think it's a drive controller failure, or a loose connection (though they can't see one) or some weird firmware corruption. We can't upgrade the firmware as the mac wont boot and we couldn't find a bootable firmware upgrade CD.
So, is this a "Back to apple" job or is there something we have not done? Also if it does go back to Apple, should I remove the hard drive. As far as we can tell the drive itself is fine and there's confidental data on it.
Thanks,
Sandy
mac mini intel   Mac OS X (10.4.7)  

... Both the installer and disk checker tell me
the machine has no hard drive - it just doesn't see a
hard drive as present.
All the indications are that the logic board has failed, and after discovering the drive wasn't recognised, your first action should have been to contact Apple since the system is new. Unless your work IT people are Apple authorised, having them open your system and work on it will certainly have endangered your warranty should Apple have any indication that such work was done on it.
I think your best course of action to have this resolved is to contact Apple and explain the symptoms that you see - the flashing question mark at startup, that you are able to boot to a valid CD, but reinstall of MacOS results in an error indicating no hard drive is present. They will likely lead you through a couple of basic troubleshooting steps to confirm that you have a hardware failure that can't be resolved, then advise you on your options which will to some extent depend on where the mini was bought and whether there is an authorised service provider or Apple store in reasonable reach.

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