iMac Freezing and Visual Artifacts

Hello to everyone!

I have and iMac (early 2008, 3.06 GHz) and while on and doing nothing except for some chatting, mouse stopped responding and the whole screen got full with artifacts. To see what I mean click the link below to see the video. After that the iMac froze ever while restarting. Warranty of course was over.

So I had to buy a new one, and luckily I was able to transfer all my data putting the iMac in target mode (see bellow). I tried all the reset stuff but it just altered the way the stripes appear.

Could it be the graphic card? and if so can it be repaired at a fair cost so I could sell it to someone that doesn't have much for a new Mac?

Thanks for your attention

The video: http://gallery.me.com/stefbystef#100318