G5 (iSight) Serious Graphical Issues, Non-booting

Question

This iMac is exhibiting some very, very odd issues.
When I first met it, it was booting up mostly ok. I did a wipe and re-install, and it worked for a few boots, or about an hour of on-time. Shortly thereafter it flipped out and but up a blocky pattern on the screen. After a bit of that, it runs fans at maximum output and freezes.
This is a friend's machine, and he took it to the Apple Store a while ago (approximately 5 months), and got no answers, only the standard "replace logic board, service is X dollars." Not wanting to spend more than a mac mini on an outdated machine, he took it home and recovered files off the perfectly functional hard drive (by removing it). I have not seen anything quite like this issue since the days of snowcrashes. I suspect a GPU issue, though I have not taken it to parts to confirm any damaged hardware. I will do this tomorrow morning.
The hard drive is fine, and the issue is independent of the drive.
Likewise, no additional RAM is installed, and adding RAM does nothing.
I removed the plastic bezel, pulled the LCD assembly a few inches away, and directed a fan across the motherboard surface, to no effect.
*Boot pattern as of posting:*
1) The "donggggggg" we all know and love
2) 1-3 seconds of black screen
3) Grayish pre-logo screen
4) Logo screen, with graphical noise overlay: http://dl.dropbox.com/u/814625/iMac/2943.JPG
5) Solid blue post-logo screen, with movable mouse visible in top left corner. Mouse is overlaid by the same kind of noise pattern as before. http://dl.dropbox.com/u/814625/iMac/2945.JPG
Closeup of mouse: http://dl.dropbox.com/u/814625/iMac/2944.JPG
6) Full-screen noise, and an indefinitely spinning fruit-pizza-of-death, leaving previous mouse image as a ghost: http://dl.dropbox.com/u/814625/iMac/2947.JPG
7) On some occasions it now enters "vacuum mode" after a while. This may coincide with a freeze of mouse movement.
8) Nothing else seems to happen.
I have read about power issues from leaking capacitors in older G5s, but this ones is out of the series by a bit. I have also read about cooling issues, but this seems to not matter. I may replace the thermal compound, but that stuff is not very cheap.
By now the machine is well out of its AppleCare warrantee period, and I am not interested in spending money on replacing an entire section of the machine, especially because I cannot think of any reason for this to be user-caused, it feels like pretty classical hardware failure to me. The machine had a cushy life, doing nothing but sitting on a desk and doing finance, mail, and internet. So far as I am aware this was not used for gaming, which would tax the graphics.
I might take this in to an Apple Store personally, but I would rather be able to solve it myself with help online, it tends to be faster.
*Extra Images:*
http://dl.dropbox.com/u/814625/iMac/2941.JPG
http://dl.dropbox.com/u/814625/iMac/2942.JPG
http://dl.dropbox.com/u/814625/iMac/2943.JPG
http://dl.dropbox.com/u/814625/iMac/2944.JPG
http://dl.dropbox.com/u/814625/iMac/2945.JPG
http://dl.dropbox.com/u/814625/iMac/2946.JPG
http://dl.dropbox.com/u/814625/iMac/2947.JPG
http://dl.dropbox.com/u/814625/iMac/2948.JPG
http://dl.dropbox.com/u/814625/iMac/2948.JPG

Answer 1

I'm going to also add my support to the "it's done for" camp. Just because a system is out of the problem range for bad capacitors doesn't mean you can't still have bad capacitors. I still run into that from time to time today. And with the iSight models, you have to remove the logic board to inspect the capacitors, because they're all on the back side. And bad capacitors don't always show outward signs of failure.
You could probably still use the system as a file server. Just disconnect the display and remote into it using VNC or Apple's Remote Desktop. Or connect an external display which would tell for sure whether it's the display panel or the video chip.
But ultimately, the things dead and not worth the money to fix. Time to move on.