Intel iMac - won't start - grey screen & progress bar

I have a 2006 Intel iMac - 20" model, Intel Core Duo, 2GHz, 2GB RAM, 250GB HDD, etc.  It was one of the very earliest Intel iMacs.  Kept updated, running OS 10.6, etc.
It has worked extremely well for over 5 years - apart from the Superdrive being temperamental sometimes - but has suddenly gone wrong.
Last week the machine completely froze for no apparent reason.  I had to force a reboot.  This failed - grey screen and the grey spinning wheel (if that's what it's called), indefinitely.
Forced reboot again and this time held down the shift key to go into safe boot mode.  This time it was successful, and I was able to get to the logon screen & log myself in.  I opened Disk Utility & attempted to do some diagnostics but the machine froze again.
Looking around various other forum postings...I rebooted the machine in single user mode and was able to get to the command line to type 'fsck -fy' to attempt to fix disk problems.  This failed repeatedly, with an error message 'invalid node structure'.
I tried to boot my machine from the OS X disc but my Superdrive refused to play ball - it would not read the disc (or any other disc for that matter, including a copy of DiskWarrior that I have).
I have now got hold of an external DVD drive in the hope that this would show up as a boot device when I switch the machine on while holding the option key down.  No such luck - the drive powers up ok (power via USB) but I'm not given the option to boot from it - in fact that screen doesn't appear at all.
All that happens now on powering up - regardless of what I do - is the grey apple symbol appears and a progress bar beneath it.  The progress bar gets stuck about 5% of the way along, and then after about 10 minutes it disappears and is replaced with the grey spinning wheel thingy.  And then it just gets stuck - nothing else happens.
HELP!
All my important data is backed up on an external drive via Time Machine, so that should be safe, but I'm desperate to get the machine running again.
One thing that occurred to me is that I've had a program called ReFit installed on the machine which allowed me to run the machine as dual boot etc. (and I do have a couple of other small partitions on the drive, not currently used) but the ReFit welcome screen stopped appearing a couple of weeks ago for some reason.  I'm wondering if this has somehow messed things up...?
Grateful for any suggestions...
Thanks,
Alan.

For the drive, you should be OK with any SATA 2 at 3 MB/s transfer speed. You could also use a SATA 1, no jumpers needed. (Not SATA 3 - can't be jumpered down.) The early 2006 Intels were 1.5 MB/s -- at least the drives were, so I'm assuming the SATA controller on the logic board was also. Might just be SATA 2 hadn't yet been introduced and can run the faster SATA 3 without jumpers. My guess is not. You should be able to set jumpers on the drive for backwards compatibility. You'll have to contact the drive manufacturer or go to their website for that info.
http://www.everymac.com/systems/apple/imac/stats/imac-core-2-duo-2.16-20-inch-sp ecs.html
As for the superdrive, I'd contact the manufacturer to check on compatibility.
Glad I'm able to help. BTW, in case you haven't noticed, maybe you want to have a look here.

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