I received my iMac back from the apple store today. They replaced the graphics card (ATI Radeon HD, 4850 512 MB). Everything seemed ok until tonight when the computer froze again. Interestingly enough iTunes kept playing, although I couldn't change the song with the keyboard. New pics are uploaded to the Flickr site:
http://www.flickr.com/photos/53063215@N04/
I'll give Applecare a call tomorrow and follow up with another update.
**Edit: The Apple store referred to the issue as "snow pixels" or "pixel snow", I forget which one. I wanted to get that into the body of a message in case someone searched for it.
Message was edited by: Billy Bogs