IMac 27" screen artifacts. Is it hardware?

Is it the story of grafic card dying? ATI Radeon HD 4850
When working with video in FCPX I put lots of video effects over the videoclip. Usually FCPX rendered video and all was ok. But once I've got kernel panic.
Restarted by holding power button. After system loaded I found a gray screen and some dots over it and 1/6 lower part of screen in gorizontal lines. The coursor was seen clearly over this haos.
I let the iMac cool and turned it on again. It was ok but when I launched FCPX again app screen just turned into "gray dotted lined screen" as did before. And I could see only apple logo when loading when it should be desktop it became "gray dotted lined screen".
Nothing helped so I reinstalled my OS X (DVD installation disks 10.6.5) I saw the screen again but now I often see black squares in folder instead of thumbnails artifacts instead of a picture, espessially appStore. I thought upgrad to 10.6.8 can help and after installing got the same "gray dotted linen screen"
Fans were working too high lately so I decided the termal paste should be replaced. Really, now my fans are working low and iStats menu makes me happy with low temperature but I stiil got troubles. Today all I can do is to write this letter under 10.6.5 OS from 32Gb USB flash. I can see the screen save and sound, but as I try to load from HDD with 10.6.8 screen becomes "gray dotted lined screen" and I can see cursor marker clearly over those dots and Lines.
All I want to know is it a diying GPU error or I can do anything?
I desided to change the thermal paste on CPU if it doesn't help I dont know whats the trouble.
PS. I would not go to service coz changing of my grafic card is too expensive.
iMac 27" Late 2009, ATI Radeon HD 4850

Please run Apple Hardware Test 3 times back to back in extended mode. If error codes appear you have confirmated you have a hardware issue. If you are not familiar with AHT please click http://support.apple.com/kb/ht1509 for instructions.

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Quote
Screen artifacts - Hardware or software?
software no way, only if OC by software/BIOS is involved.
Quote
I RMA'd the board and installed the new one. I don't get the first failure anymore, but now I intermittently get this:
By board you mean mainboard or video card?
Test VGA in another machine.
Quote
Within 10 hours of building the new PC, I started to get this all the time:
So 10 hours works fine? If yes looks like temp related then.[overheating issue]

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The following general specifications of the devices have experienced periodic shortages is this.
27-inch, Late 2009
CPU 2,66 GHz Intel Core i5
RAM 8 GB 1067 MHz DDR3
Graphic Card ATI Radeon HD 4850 512 MB
Serial Number xxxxxxxxxxx
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Screen: LCD
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Pixel: 32 Bit Colurs
Main Screen: Evet
Online: Evet
Inline: Evet
DisplayPort
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Using ten foot pole...
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This thread is a continuation of [New iMac 27inch screen flickering/tearing/shutoff|http://discussions.apple.com/thread.jspa?threadID=22 12682]. The thread was becoming too long and was causing some browsers to time out. The older thread has been locked.

citrus101 wrote:
Hi Brett L,
thank you for the coordination of this helpful thread. Are you Apple? If yes, please allow me to ask you three questions:
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3) When will it be save to buy a new iMac?
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Message was edited by: Warren Beasley

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Hello, Bernardneoh.
Thank you for visiting Apple Support Communities.
Here is a troubleshooting article that I would recommend going through when experiencing this issue.
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http://support.apple.com/kb/ht1573
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