Same problem here. Early 2010 iMac i7 27" w/ 16gb of RAM. Everything started slowing down & getting glitchy about a week out of warranty, & then my computer wouldn't even start up. I took it in to the Apple store & they could not figure it out, but told me to re-install Lion. I did that, and everything ran fine... for a while.
About a week ago, everything started to run really really slow. iTunes could not play songs & would freeze my comp for 5-10 mins. Now the same lagging is happening in nearly every program. Applications stop responding & I get the spinny wheel of death.
So I checked my disk utility & see the error - "This drive has a hardware problem that can't be repaired..."
I'm out of warranty and can't afford all this downtime. Apple - PLEASE FIX THIS - I have been a Mac user all my life & this is the first time I have been so outraged at the performance of an Apple product!