IMac erase OS hard drive hangs for hours - powered off now only get a spinning cog whatever I do

I have a 27 inch 2011 iMac that I have been trying to totally wipe and reinstall the OS (Mountain Lion) by erasing it with Command + R. It has a 2TB drive in it and the problem is that at the end the erase hard drive hangs on last bit for hours on end. I (probably stupidly) held down the power button and tried doing it again.
Since then every time all that has happened is the Apple logo comes on and the cog constantly spins.
Holding the command key on startup cos spins then eventually brings up a blank screen. If I press the C key with a CD in there it starts making CD reading noises for a few minutes then does nothing - the cog just spins forever.
I am really worried that I have totally messed this thing up forever and dont want to have to start taking it apart at all if possible.
Any help is greatly appreciated!
Thanks

Hi kant3r,
Thanks for visiting Apple Support Communities.
If your iMac is only booting to a gray screen or Apple logo with a "spinning gear," try these troubleshooting steps first:
Disconnect, test peripheral devices and network cables
Note: "Peripheral devices" refers to external devices other than what came with your Mac, such as hard drives, printers, or hubs that you connect via a USB or FireWire cable.
Shut down your Mac. If necessary, hold your Mac's power button for several seconds to force it to power down.
Disconnect all peripheral devices such as external hard drives or printers (leave only the display, a keyboard, and mouse connected).
Disconnect any Ethernet cables.
Start up your Mac.
If you are using a desktop Mac with a third-party keyboard and/or mouse device, and the issue still occurs, try starting up with an Apple keyboard and mouse connected instead. Try starting with no keyboard and mouse connected, then connect them after start up. Also, try a different USB port on your Mac.
If the gray screen issue persists with no devices connected, go to the next section (with the peripherals still disconnected).
Perform a Safe Boot
Simply performing a Safe Boot may resolve this issue.
Shut down your Mac. If necessary, hold your Mac's power button for several seconds to force it to power down.
Start your Mac, then immediately hold the Shift key. This performs a Safe Boot. Advanced tip: If you want to see the status of a Safe Boot as it progresses, you can hold Shift-Command-V during start up (instead of just Shift).
Note: A Safe Boot takes longer than a typical start up because it includes a disk check and other operations.
If your Mac starts up as expected, immediately try restarting.
If the Safe Boot does not work, or the restart after a successful Safe Boot does not work, go to the next section.
Reset the NVRAM / PRAM
Shut down your Mac. If necessary, hold your Mac's power button for several seconds to force it to power down.
Reset the NVRAM / PRAM.
The information above can be found here:
Mac OS X: Gray screen appears during startup
http://support.apple.com/kb/TS2570
After performing these steps, try again to boot to OS X Recovery or the original OS X install disc that came with your iMac.
Best Regards,
Jeremy

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