This sounds awfully familiar--a lot like my friend's iMac that was doing the same thing. We added more RAM so it had 2.5 GB and ran SMART Utility, which passed the hard drive with no errors found:
http://www.versiontracker.com/dyn/moreinfo/macosx/23232
(You can download the demo and run it several times for free.)
We then reinstalled and updated the OS and all seemed to be well.
However, some months later the iMac made a "whirly clicky sound" and froze. My friend shut it down, and then it booted up to a flashing question mark. I had her boot from the install disc and navigate to Disk Utility, but Disk Utility could not see the drive at all, so it had obviously failed.
Based on this experience, there's a good chance that your hard drive could be ready to fail, even if the SMART status shows as verified. So your first order of business is to make a good up to date backup so your data will be safe.
Once you have a good backup, boot from your install disc and choose your language and then navigate to Disk Utility. Select your boot drive by brand name and repair it. Also check the SMART status.
Also run SMART Utility, which is a bit more critical than Disk Utility. If you get any indication that your hard drive is failing, believe it. Even if SMART is verified and the drive passes, it could still fail without notice.
What we did with my friend's iMac was to install the OS and other software onto an external FireWire Drive and migrated her data from a fairly recent backup. So far the iMac is running perfectly from the external FW drive, and this might be a possible solution for you if the internal drive is on its way out.
I have a related topic in this forum with some additional questions that might be of interest to you--at least if I ever get any answers to them.
Do all you can to check out your hard drive, as I suspect that it may be the underlying problem. If so, you need to address the drive before installing any other software.
Good luck!