blue screen after startup and system hangs

Going through various material available on the forum - i went through following self help and am finally turning to experts

1. Safe boot - everything works, even the login window after 'boot sequence is apple logo, spining pointer, loading mac and then login window'.

2. Single User mode - works, fsck shows no error, continuing with boot using rc in single user mode works with no graphics interface

3. Deletion of /var/db/.Applesetupdone or something equivalent Or even moving around other .* files - doesn't solve the problem

4. Looking at various logs in /var/log & other places nothing is obivious except for following few messages when doing a *standard boot*

windowserver.log ==> (last few lines)

Accel caps: 00000003

CGXPerformInitialDisplayConfiguration

Display 0x4271500: MappedDisplay Unit 0; Vendor 0x610 Model 0x9c54 S/N 0; online enabled built-in ....

Display 0x3f003d: MappedDisplay Unit 1; Vendor 0xfffffffff Model 0xffffffff S/N -1; offline enabled (2464,0)[1 x 1], ...

system.log ===> (last 2 lines)

localhost kernel[0]: ATY,Aphrodite2_A: vram [98000000:08000000]

localhost kernel[0]: ATY,Aphrodite2_B: vram [98000000:08000000]

5. Lastly blued always seems to be crashing. So moved it to a different name to see if i can resolve the issue, no luck.

Bottomline all above effort didin't solved the blue screen with standard login.

What could be the reason? I didn;t installed any memory - the system was/has been working smootly over past few years and only recently started making lots of noise or hangups after awakening from sleep. Do i have the faulty system memory?

I also tried reinstalling the OS - no luck there either.

Also i don't suspect the memory, because in safe boot the system performs normal with all graphical interfaces. What is the equivalent of /sbin/rc for multiuser mode? Is there a file similar to unix that i can look at to control what gets launched as part of multiuser boot?

Thanks in advance for all help.