Late 2006 iMac black screen after Apple logo and spinning gear

Hello all,

I received this computer from a friend who had given up on it. After spending a couple days researching online for a fix, I finally found one that worked, albeit temporarily. I connected the iMac to my MBP using target disk mode, navigated to /Library/Preferences, found the com.apple.loginwindow.plist file and dragged it to the trash. Then I emptied the trash, unmounted the iMac's HD by dragging it to the trash, and restarted. Success! The computer started up normally and I arrived at the desktop. It was running 10.6.3, so I updated to 10.6.8, restarted, then installed 10.7.2 Lion, updated to 10.7.5, installed a couple apps (GraphicConverter and Opera) and then changed my Energy Saver preferences to never let the computer or screen sleep. I had read somewhere doing this will sometimes keep the problem from reappearing. So, thinking all was well, I went to bed for the night. The next morning the screen was frozen, accepting no input from keyboard or mouse. So I did a hard reset, and was rewarded with the original problem reappearing. Thinking okay, I know how to deal with this, I'll just remove the prefs file again. So I did, but like an idiot forgot to unmount the iMac before shutting it down and restarting. It started up and again went to black screen after the Apple Logo.

Ive tried all the different fixes and none have worked. I wiped the iMacs HD and installed Lion on an external USB HD but the same thing happens using that drive as well. So now I'm here. Hopefully there's something I can do.

The next step I'm contemplating is replacing the iMac's HD.

Any input at all will be greatly appreciated!