iMac, possible HDD failure, need advice please

[fauxsheux]

Thanks in advance for the help. Here's my issue, just got an iMac 21.5, late 2009 model (intel). It turns on, makes wake up tone, appears to be loading (apple icon on screen with rotating load sybol also) then comes up with a long error. Computer reboots right after error like a boot loop. I don't know if I should try to salvage the HDD and reinstall Mac o/s or just do a HDD swap, either way, loading the OSX may be where I need help. By the way, no keyboard or mouse support while trying to load up, green light on KB flashes and never syncs up. So if I put OSX on a flash drive can I reboot with the flash drive installed and format/install OSX? Keep in mind, the computer never gets past the start up screen. I will attach pics of how far I get before it reboots.