OS X Mountain Lion Recovery - reinstall failed with erase reinstall

iMac mid-2007 Mac OS X Mountain Lion v10.8.2. Grey screen on start up (day before got three messages that HP printer software update was available but no software could be found when I tried to update. Other than that iMac was working fine the day before).
Did all steps recommended for Grey Screen on Start Up and did not fix it. Used Command R - Disk Utility to try to repair the hard drive. Disk Utility said it could not repair the disk, to back up files and reformat the disk. From the Recovery System menu, selected Disk Utility - Erase to erase hard drive. Erase worked. Quit Disk Utility. Selected Reinstall Mac OS X from the Recovery System menu. System says "downloading additional components" and it will take 3 hours to download, even though we have highspeed broadband (Comcast) internet. Left it to continue overnight. Came back in the a.m. and giant warning message says Reinstall Failed-Contact Software Manufacturer or Restart to Try Again. Restart said Disk Utility could not repair the hard drive. Disk Utility said hard drive was unmounted and Mount would not mount it.
Shut down and started again with Command R. Used Disk Utility - Erase to erase the hard drive again. Erase seemed to work again. Hard drive mounted. Quit Disk Utility and selected Reinstall Mac OS X from the Recovery System menu. Once again waiting an estimated 2 1/2 hours for additional components to download.
Am I missing something? If it fails again this time, is there anything else I can do or must I take it in to be repaired (no longer covered under Apple Care Protection Plan due to age of iMac).

Well, if Disk Utility cannot repair the drive, one other option is to use Disk Warrior ($$). That would mean having to boot from their CD or having it installed on an external bootable clone and trying it from there. But, I'm guessing that your hard drive is about to fail (permanently) - nothing to do with the software.
You might want to consider making an appointment at your nearest Genius Bar - help there is free unless you need a repair or hard drive replacement - you'd need to pay for that of course. But at least you'd get their diagnosis; they have better testing equipment that a consumer has access to.

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GB

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Which Mac??????
iMac, MacBook Pro, Mini,, what?
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OS X Mountain Lion Recovery - reinstall failed with erase reinstall

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