Just to add my own woes to this rather long thread - my 24" iMac (2008) failed earlier in the year, resulting in a logic board repair. It cost me over 800 New zealand dollars to fix. The repair lasted around 3 weeks before it broke again. A second fix was done free of charge (to repair the repair ?) and just last week, after two months, I now have another problem - black screen, repeating chimes, cannot boot. These models have sufferered from some serious quality issues which I believe Apple have ironed out, but I find it very disappointing that there simply is no way of getting a refund, or credit or anything like this in New Zealand such as has been suggested above.
From my perspective, if you have a 2008 model, stop torturing yourself. It will cost you more in the long run to try and get it repaired (unsuccessfully) than if you buy a new iMac or another brand. The annoying thing about the way the iMac is built is that it isn't even possible to re-use the screen. So you also end up having to pay to recycle the **** thing. I'm going to put mine up for sale for $1 on Trade Me (which is the New Zealand equivalent of eBay) and hopefully it will be of some use to anyone who wants it.