Thanks for your reply.
I had already tried all of the suggestions from that link and in safe boot it works fine. I will try to get the install DVD.
Could I just ask, does this look like it might be the GPU? as I said above, it works 100% fine in safe boot and I haven't seen any glitches on the graphics.
It was a separate video card, I removed it with the help of these instructions http://www.ifixit.com/Guide/iMac+Intel+21.5-Inch+EMC+2428+GPU+Card+Replacement/5 980
I did a reflow and reassembled, AND IT NOW WORKS 100%
It wasn't quite as easy as it sounds, I am a PC engineer but I have very little experience in diagnosing iMac problems.