It is comforting to know that I am not the only one having this type of problem but it is also worrying at how widespread the iMac "logic board" problem is. I also have an iMac from mid-2008 which stopped working a couple of weeks ago (just days after a 10.7.3 update, but maybe that is just coincidence).
It simply stopped booting beyond the grey screen and the spinning wheel stopped turning after around 30 seconds each time. Originally, I bought the iMac direct from the Apple Store when I lived in France (it shipped from Ireland, I think) and I now live in New Zealand where I have just taken the iMac into a repair place in Auckland to be fixed.
They have replaced the hard-drive and they told me that it was working, initially, after they replaced the HD. However, today they have called me to state that it also seems to have failed a load of diagnostics tests and that there was a problem with the logic board.
In ten years of using Apple products I am quite disappointed. I bought the 24" 3GHz iMac so that it would last "a few years" of normal use. Now I end up with no computer and a hefty repair bill still to pay ? This iMac wasn't really very good quality compared to a lot of other apple products I have bought in the past (iPad, iPod Touch trouble and two macbook pros). The iMac also had a screwed optical drive and has always generated excessive heat most of the time. Unfortunately, what made this company great just doesn't shine through anymore. I can't believe the need for paying even more cash for "insurance" / apple care for a computer that should be built correctly and to the right quality in the first place. Does anybody have any options ? The "rest" of the iMac was fine (screen etc.) so is there still any hope or am I looking at saving to buy something else ?