My imac has a grey screen wont boot from hhd pls help

hello,
I have an imac from late 2008 with snow leopard. Late saturday evening 24 Mar I had powered
down my imac then later turned it on. Now only a grey screen appears, nothing more. If I leave
the imac on a folder with a question mark appears and blinks.
I have tried the following to fix the problem and ALL HAVE FAILED:
they are:
1. resetting the pram. it doesnt work.
2. booting from the installation cd. The imac doesn't even READ the cd, the screen remains grey and doesn't
read the cd at all.
3. booting in the safe mode. nothing happens, the screen remains grey.
4. booting in apple hardware test mode: nothing happens screen remains grey.
5. boot with option key pressed, so as to choose mac HD or my windows partition. nothing
happens, the screen remains grey.
All of these have failed to fix the problem.
When I power on my imac I heard the chord, a slight spin of the HHD I'm sure that's what it is,
and then nothing.grey screen.
I have tried unpluggling the power cord for 15 seconds, reconnecting it, waitiing five seconds
and then powering up the imac. it doesn't do any good.
any help anyone can provide will be appreciated.
do you think it is a hard drive error or failure? 
why doesn't it read or boot from the instllation CD??  and yes I am using the correct disk.
thanks folks for yr help and opinions.
Alfonso

Ok. so you stated the screen remains gray. Is it just plain gray? Does it have a folder with a question mark on it? Do you see the little pin wheel thingy?
You also stated you can't boot from the install disc. Turn the machine on and put the disc in the drive. Shut the machine down by holding down the start button for five seconds or so and wait a further 20 seconds. Restart the machine and hold down the 'C' key before the chime and keep holding it down until the machine boots form the disc. It can take up to three minutes to boot from the disc. Once it has booted from the disc select the language and go to the Utilities menu at the top and run the disc repair utility.
The hardware test is built in and should work regardless. Turn the machine on and hold down the 'D' key before the chime and keep holding it down until the hardware test starts.
I fear you have not given enough time or used the correct procedure to do the tests you state you have done.

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