IMac crash - Hang and crazy display on restart

Question

I've got an iMac Core 2 Duo and have had it for a year and a half. (Warranty expired)
I upgraded to Snow Leopard when it came out.
It hung recently and a restart brought up the grey screen, apple and the spinning load symbol but then the screen went light grey and was covered by dozens of 3mm black squares. The bottom 20mm of the screen was also black.
Sometimes a boot will get to the blue screen where I can use the mouse but then stalls and on occasion it'll get to the desktop image with an active mouse but then the pinwheel of death.
I've flashed the PRAM.
I've run an advanced hardware test. (Nothing)
I've removed all devices except the keyboard.
I can boot into Safemode and have done a permissions repair.
Still nothing.
I've tried to boot off another drive. Stills fails. Only safe mode will work.
Tried both the SL installer disk and the L installer disk and they hang on the screen that follows the language selection.
Tried with only one memory chip, then the other. Still didn't work.
This all happened a few weeks ago and I managed to get it working again after booting using verbose mode. Now verbose mode runs but then once it's done I get a black hang screen covered in tiny white dots. The pattern is reminiscent of the above mentioned grey screen with black dots but with more noise and inverted.
Any ideas?

Answer 1

Hmm. Based on a hunch that the screen tears implied a video card issue I tried deactivating the Quartz Extreme using the instructions I found at,..
http://www.felipecruz.com/g5-freeze-ups-problem.php
+To disable Quartz Extreme, enter the following command in Terminal:+
+defaults write /Library/Preferences/com.apple.windowserver GLCompositor -dict tileHeight -int 0 tileWidth -int 0+
+To re-enable Quartz Extreme, enter the following command in Terminal:+
+defaults delete /Library/Preferences/com.apple.windowserver GLCompositor+
+You can also downlaod this app to disable Quartz Extreme.+
+http://developer.apple.com/qa/qa2001/downloads/qa1236_1.tar.gz+
And Bam! Bob's your uncle, it booted without a problem.
Now to go find out how to reinstall the video card drivers.