The hard drive died (won't even boot anymore, or be recognized by Apple Utility).
The replacement drive is a SATA 500 GB/Go, and we can't get the old drive out of it's case (to put the new drive in) because of the star-shaped screws.
Use Disk Utility from the menus of the installer disk to prepare the disk for Mac use first. Most new drives come preformatted for PC use and the OSX installer cannot install onto them immediately.
In Disk Utility do the following things in this order:
• Find the new disk in the list on the left and click it to select it
• Click the Partition tab
• Change the Volume Scheme drop down from "Current" to "1 Partition"
• Click the "Options" button at the bottom and select either GUID (if your iMac is one with an Intel processor) or APM (if your iMac is a G5 PowerPC based iMac)
• Make sure the Volume Information reads "Mac OS Extended (Journaled) for the format and give it the name you wish to call it
• Click "Apply"
• When it finishes preparing the drive in a few seconds, quit Disk Utility
• Proceed with the installation and you should be fine