I'm getting this too on a stock iMac core2Duo post ML install. My ML prompted me to do the 10.8.2 upgrade, and it failed, never restarting. I've now (on and off) spent 2 months trying everything I can think of! luckily it's not a mission critical iMac.
I CAN successfully install Snow Leopard 10.6 from the 2Z691-6428-A install DVD, or
I CAN successfully install ubuntu 10.04 LTS Lucid Lynx as main OS,
(the above installations however don't feel right, get a lot of dimmed blue screen/extremely slow booting/sometimes no desktop for ten minutes post reboot!)
everything else I try, usb & dvd based Lion/ML/Original iMac grey install 10.6 2Z691-6590-A discs/ any other ubuntu including the 11's fails. I've erased HDD in Mac, erased in ubuntu 10.04, partitioned with disk-utility or Gparted, basically tried nearly every logical step. AHT v.3A178 on iMac Applications DVD won't even run.
I don't like the fact that the iMac is not able to be returned to a blank condition. ML has obviously done something slightly tricky to the HDD, which normally wouldn't be a problem, but here we're experiencing the "one-in-a-thousand' type of problem which could affect very many people if they also have an ML upgrade go-wrong.
I think I nearly agree that the HDD is 'faulty' - except it is passing all the s.m.a.r.t. tests in Linux - and that my only choice is to open up the iMac and swap the 250GB HDD for something newer and untouched by ML. With the available tools, and quite a bit of time spent in terminal, I certainly would have gained much time by a physical swap. There is a whiff of danger about a failed Mountain Lion installation - it seems to 'break' the HDD!
in comparison, I'm beta testing ML 10.8.3 12D50 (not on this iMac obviously) and it's nearly ready!