Ran AHT_All passed.  Still have prohibitory sign and issues upon boot up.

I have done ALL the tests. I have done the AHT, I have booted up from the OSX disk and so on but my Mac either hangs on the radian circle, continues on to the prohibitory sign. Should I re-install OSX. I have everything I need backed-up. What can I expect if I re-install OSX? Should I upgrade operating system?
Thanks in advance.

Here's what I'd try...
1. Insert the Mac OS X Install disc that came with your computer, then restart the computer while holding the C key.
2. When your computer finishes starting up from the disc, choose Disk Utility from the Installer menu. (In Mac OS X 10.4 or later, you must select your language first.)
*Important: Do not click Continue in the first screen of the Installer. If you do, you must restart from the disc again to access Disk Utility.*
3. Click the Erase tab.
4. Click the disclosure triangle to the left of the hard drive icon to display the names of your hard disk volumes and partitions.
5. Select your Mac OS X volume.
6. Highlight the drive, select Partition Tab, then Format type... MacOS Extended Journalled, select the Security Options button, choose Zero Out Data, Erase... after completion hopefully you'll be able to get a good install.

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