This doesn't help. but my first thought on seeing your picture was 'addressing bit failure in the video memory'. Unfortunately, as you already know, the video 'card' on the eMac is a chipset mounted to the logic board, and the only repair I'm aware of is replacement. An
Apple Service Provider could give you an estimate but unless your eMac is still within the standard one-year hardware warrenty or you purchased the three-year ApplceCare extended warrenty, that's not an attractice cost-benefit tradeoff.
On the chance that I'm wrong and it's some unusual system corruption, look again for the Hardware Test disc. It can be tricky figuring out where it is; on early eMacs it was always a separate CD, on recent eMacs it's a partition on the Restore DVD, and on models in between, it depends on whether the OS X Install disc was on a DVD or not. You might try booting from your OS X Install or Restore disc using
Startup Manager to see if Hardware Test is on a partition.
If nothing else, booting off the OS X Install disk (as if you were going to run
Disk Utility > Repair Disk to check the drive) should further confirm if the problem is in the video hardware rather than in the hard drive's OS: if the broken display appears when booted from the OS X Install disc, it's pretty certainly the video hardware.