IMac 24" with intermittent circle/slash screen at start up issue

Hi Everyone,
Yesterday while listening to music on iTunes, my 3 year old iMac suddenly froze up. No sound, no mouse, no keyboard, nothing...I had to hold down the power switch to turn it off.
I powered it back on and up popped a white screen and a circle with a slash icon. I powered down again, unplugged the machine and let it sit for a while. Powered it up again with same results. Ugh.
At that point I reinstalled the OS (using the archive the previous system option). The install went fine and everything was back up a running..or so I thought....
Now every time I initially turn the iMac on, it goes to the circle/slash screen and hangs. I then power down using the power button. Press the power button again, it boots as normal and seems to work fine. Wacky.
Does this sound like a hardware issue or software issue? Hard drive failure? Format drive and reinstall from scratch?
Anyway, thanks in advance!

I would recommend doing an Apple Hardware Test to see if it is hardware. By the way you are describing the symptoms it could be a hard drive. If you purchased AppleCare the machine will be covered. If it is hardware then make an appointment with your local Apple Authorized Service Provder and they can get you an estimate.
Regards,
Roger

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First it was slowing down, showing regularly beach balls for a fairly long time, used to have Kernel Panics once in a while. Slowed down more and more often. Decided to do a reinstall. Backed up. First Leopard, than Snow Leopard. Worked well again.
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IMac 24" with intermittent circle/slash screen at start up issue

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