intel imac has gray screen at startup

My imac (intel) started having problems this afternoon that resulted in a gray screen at start up. Here are the events:

1) I was intrigued by the possibility of upgrading to Lion but decided to do some research first. At some point in the process, I accidentally clicked on either a "Buy Now" or "Download Now" button. I was expecting to be directed to a page for payment, but nothing happened except Safari seemed to get jammed up. I closed that page and thought nothing of it. Decided I wasn't ready to upgrade anyway because I still have some PPC software.

2) I received a software update alert and completed most of the updates.

3) I tried to stream a movie from netflix, but kept getting a page that said plug-in failure.

4) I attempted to restart, got the chimes, and then the blank gray screen but nothing else.

5) Tried to restart while holding down shift key. Was able to startup.

6) Attempted a regular restart again just to see what would happen. Got the chime and gray screen again.

7) Attempted to restart again holding down the option key. Was able to start from harddrive.

8) Attempted a regular restart again and it restarted just fine.

So, my questions are:

1) did I somehow partially download Lion and that is what is causing these problems?

2) have I fixed the problem or is there some underlying issue that will resurface?

3) is it likely that I need to take it in for service or will need to in the very near future and better just do it now?

Oh also, when I went to unplug peripheries, computer was extremely hot. istat says my harddrive is 126 F/ 52 C. Is that normal?

Thanks