Do I restore from "Mac OS Base system" in iMac recovery

'Mac OS Base System' is not for consumer use. You should ignore it.

'Mac OS Base System' exists only to be used by the system under specific circumstances when the OS needs to be reinstalled. It cannot be erased because it isn't on a storage drive.

IMHO, Apple should find a way to simply hide 'Mac OS Base System' from the user's eyes.

If your Mac starts up to a circle with a line through it - Apple Support

The HD has likely failed.If the computer is a 2017 iMac or older, then please consider replacing it as it is obsolete and Apple considers it vintage.

Step 1. Shut down your Mac by press the power button for about 10s

Step 2. Boot your Mac into Recovery Mode:

Apple silicon: Turn on your Mac and continue to press and hold the power button until you see the startup options window. Click the gear icon labeled Options, then click Continue.

Any other Mac: Turn on your Mac, then immediately press and hold these two keys until you see an Apple logo or other image: Command (⌘) and R.

Step 3. Choose Disk Utility

Step 4. Select your disk and run First Aid