I spent an hour discussing this problem with an engineer who has experience with LCD panels. Here was his conclusion:
ENVIRONMENTAL FACTORS IRRELEVANT WITH LCD PANELS
1.) The individual cells of an LCD are sealed.
2.) Dust does not effect LCD cells.
3.) Moisture/Vapor/Humidity/Water do not effect LCD cells. Since the cells are sealed there is no way for water of any kind to enter the cell. In fact, he's submerged LCD panels in water for 4-5 hours (to remove various protective layers from the panels) and then turned them on after they've dried.
SMEARING/SMUDGES ARE CLEARLY CAUSED BY EXCESSIVE HEAT
The engineer looked at the various photos on this thread as well as my iMac and without skipping a beat he said "Your LCD panel is too hot." I asked him if he'd ever seen this before. He responded "Oh, yeah. I've accidentally exposed LCD panels to a heat source 4-5 times and caused this exact problem. The individual cells contain liquid crystals. If they're exposed to excess heat and begin to boil these smudges are the result. It gets worse over time because the panel is consistently being subjected to overheating causing more cells to boil and leak. This stuff is really simple; dead cells are black, working cells emit a full range of colors and cells that have boiled off some of their fluid are grey. What you have is clear, obvious, scientific proof that the LCD is being overheated, that the cells are boiling off some of that fluid, the cells are bursting and the fluid is staining the inside of your panel. The only way to fix this is to redesign the iMac."
QUALIFICATIONS OF ENGINEER
My engineering partner has worked professionally with LCD panels for over 5 years. He's personally assembled over 500 units that required custom LCD panel installation. He is a professional engineer who previously worked for Bell Labs as well as private firms with military contracts. He has experience in electrical engineering, electronics, optics, IR and projection.
CONCLUSION
I'm now convinced that the iMac has serious overheating issues and that it is cooking the LCD panel.
Anyone who has ever been told their environment is to blame has been deceived. Smoking, dust, a clean room, humidity...none of these are factors when dealing with a technology sealed from the outside world. Heat and heat alone is the culprit to this issue. This is a design flaw in the iMac. It deserves a recall and a redesign.