Hello everyone.
I had the exact same problem, and it was fixed after Apple replaced the logic board (motherboard) on my 24" iMac 2,16 (the very first 24" iMac).
It started last year with the exact same issues already discussed here as well as in
http://discussions.apple.com/thread.jspa?threadID=1441391&tstart=0 . Back when I bought it, I went to the Apple retailer store to ask about heating problems, as I thought my machine wasn't operating the fans correctly. They told me they knew of no problems of this kind, so I didn't do much about it after that.
About 6 months of World of Warcraft, iMovie, Photoshop, Youtube, Garageband, web browsing, word processing, iTunes playing, sometimes some of these all at the same time, my computer started to freeze once a day, then twice, 3, 4 times, and graphic tearing started showing up, first in WOW, then all over the screen. After some extensive reading here on these very same forums, I realized my logic board, being constantly subject to +80º C temperatures, simply started to fry up. One day, my iMac simply did not boot up at all.
Now its working flawlessly but again, temperatures get to over 70º, sometimes 80º, and the fans don't go anywhere higher than 600-1000 RPM; I monitor temperatures with Temperature Monitor (free app) and use smcFanControl (also a free app) and manually turn up the ventilation when I'm using Warcraft (5 hours a day). No issues so far.
The temperature on both processors, the GPU diode and specially in the power supply position is messed up, I believe by faulty controllers that don't manage the fans properly, leading to hardware malfunctions. Sadly, I have to say Apple, after turning to intel, has lost most of its reliability in hardware. My former iMac G4 never had any problems for 2 years (used Warcraft III there as well, and iMovie)
Anyone with these issues, if your computer started freezing up and showing graphical corruption, its most likely a logic board slowly dying. Take it in for repairs as soon as possible.