Well, Wild Bill, you were wrong. Apple just released a Firmware upgrade with the Leopard update today (Thursday, 15 Nov.) with the specific intent to fix the stability issue. Where's your proof again?
I'm not saying it is hardware. But, it still could be.
While you cannot fix hardware with software, you can hide symptoms of bad hardware with software.
So, it could still be bad hardware. But, they may have found a way to "cover-up" a symptom without replacing the hardware.
Intel once did the same thing with processors that had a rather major calculation error. Rather than recall the processors, they used a software patch to compensate for the problem.
Actually, many processors contain defects (or routines that fail to function as originally planned). Once the final shipping version is released, the processor company (for example Intel or AMD) will publish a list of known issues. The manufacturers of computers and operating systems can then write routines that minimize the effects (or compensate for the defects) and maintain a stable system.
The freezing issue may not have been a hardware defect. But, if it were simply a driver issue, then a firmware update would not have been necessary.
It wasn't an OS issue, since the problem survived OS 10.4 to continue in 10.5.
We do know that ATI had some acknowledged hardware defects that led to replacement parts in the PC world.
It's possible that Apple just found a way to prevent the defect from producing the symptom without replacing all the hardware at their expense. If so, that doesn't fix the defect, but rather modifies the operation so that the defect doesn't affect anything.
Consider the whole tread separation issue with the Firestone tires. After enough trucks had rolled-over, Firestone recalled the tires.
Other brands were affected by the same issue, but not all of them recalled the tires.
My trucks tires had the exact same issue. But, they were not recalled. Instead, they issued a statement that said if you maintained the tires air pressure at a specific amount, that the issue would not present itself.
Keeping the tires inflated at the exact pressure they specified didn't fix the defect in the tire. But, it prevented the tire's tread from separating.
Of course, the tire wouldn't grab on the ice very well anymore. But, the tread remained in-tact.
Anyway, the freezing iMac issue may be resolved. But, the firmware patch neither proves or disproves the possibility of it being hardware related.
If it does fix the problem without disabling an important feature, or reducing performance, then that's great.
Only those that care enough to investigate will determine whether specifications have been somehow altered or performance impaired. Hopefully for the iMac owners, no compromise was necessary.