Potential Blue Screen of Death?

So I have a Mac G5 Machine with 10.5.8 install on it and the symtoms are as follow:

I think I might have a Operating System Failure because I have tried the following to diagose it.

1. I tried hooking it up to another mac via Firewire to see if it would read the harddrive. It turns out, it does and it's not a hardware issue.

2. I tried the Hold the option key during startup. The OS X startup manager will appear, allowing you to select a disk to boot from. It doesn't seem to work because where the boot disk is at is on the main hard drive and it won't boot past the blue screen.

3. I tried booting it up from safemode but it won't allow me to.

4. I tried resetting the PRAM just to make sure it wasn't the RAM.

What it DOES DO is boot up to the Apple Screen. After the Apple screen it goes into a blue screen, the screen where usually your desktop shows up on. I'm unable to see anything on this screen except the mouse curser. And yes, this mouse curser moves.

Here's an image of what it looks like

[IMG]http://i136.photobucket.com/albums/q174/truthyaj/IMAG0382.jpg[/IMG]

I'm thinking what i should do is re-install 10.5.8 and see what happens or Maybe i can boot from the Leapord install disk.

Please help guide me to getting this issue resolved.

Thanks in advanced.