iMac (early 2008): grey screen with Apple logo and spinning wheel

Hi there,

I have recently had a problem with my iMac - it started with distorted graphics and I booted into Safe Boot to back up all files with the intention of reinstalling OS X (either from original install CDs or from USB drive with Mountain Lion on). Safe Boot got rid of the distorted graphics but as I rebooted to reinstall, the iMac hung on the spinning wheel on a grey screen with the Apple logo.

I have tried (in no particular order) : resetting PRAM and SMC, booting from original install CDs, booting from the self-created Mountain Lion USB stick, booting into Safe Boot again, booting normally, taking out keyboard/mouse and booting normally... the pinwheel either freezes, the iMac reboots itself, or comes up with a screen telling me to reboot due to a problem. If I hold down command-V at startup it always freezes/fails at the same point and there's usually a previous shutdown cause of 3 or -128?!

I don't seem to be able to run the hardware test either from DVD or internet, I can boot into single user mode and the iMac will stay up for hours but I don't know what to look at or what to fix! There are kernel panic logs relating to some of the shutdowns but as I can't view these out of single-user mode I can't attach them to the post but can look & reply on another machine.

It's an early 2008 iMac, 24" screen, running OS X 10.8.2 - I'd appreciate any help and will try to provide any extra information anyone needs (that I can glean from single user mode, anyway!)

Kind regards,

Carly