imac 2009 won't boot and gets stuck on grey screen

HI

I have a 2009 iMac that has started misbehaving. It was working fine and then the screen flickered and the machine rebooted. It now can't get past the grey apple logo screen and the spinning wheel. The wheel spins for a while and then it either hangs or I get a kernel panic telling me to reboot.

So far I have tried the following and I've read as many apple support docs as I can find:

Booting into safe mode - doesn't work I get a progress bar but then it kernel panics and reboots

Reset the NVRAM - The reset works but nothing changes

Run the AHT - All hardware is fine nothing reporting an issue

Taken it to the Genius Bar - They say it's definitely the HDD.

Replaced the HDD with a Seagate ST1000DX001 - This doesn't show up in the boot manager so I figure it needs formatting first

Tried to boot from my os 10.5.2 disks - the optical drive whirs and spins but nothing happens, still tries to boot from the non-existent HDD and hangs.

I've reseated the RAM - No change

I'm fast running out of ideas, I will try putting the old HDD in a caddy and seeing if I can boot from that to eliminate internal cable failure and I will see if I can get a friend to create a bootable USB drive for me to install from. But I'm at a bit of a loss as to what more I can do.

I got all my data off using single user mode so I dont mind a scorched earth approach to fixing this.

Any and all ideas greatly appreciated!!