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IMac G5: Is my hard drive failing?

Update:10-11Source: network consolidation
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I have an iMac G5 that I've had for less than a year (shipped April 16 2005). It's a 1.8 Ghz PowerPC G5, with 1GB DDR SDRAM, and 250 GB hard drive. The machine model is PowerMac8.1. I'm running OS 10.4.6.
I've been having reliability issues starting 5 months after I got the machine. I'm quite dismayed with this; I've been using Macs for years and have been happy to pay the high Apple prices for the ease of use and reliability of the machines. Every other Mac I've had, I've used for at least 3 years (that includes two that were used when I got them), then gave to someone else who got several more years use after I upgraded. I've heard that the iMac G5s have overheating problems and a high failure rate, and am concerned that I've gotten one of the lemon machines. I've got to say that I'm really missing my iMac G4.
Here's a history of my ongoing iMac G5 woes:
Fan runs loudly (pretty much since I first got the machine).
October 2005: Kernal panic -> Apple replaced logic board. The repair techs also overtightened and stripped the screws holding the back of the chassis on.
February 2006: Machine begins to sporadically make a rhythmic noise (this sounds like "tongky tongky tongky". The noise sounds like something internal and mechanical (i.e., not a weird speaker noise output), and comes from the left side of the machine (where the hard drive is). When the noise happens, it becomes impossible to click on any OS X functionality, including the desktop, shutdown or restart. However, the screen is not frozen; I can move the cursor, but get the spinning icon. Restarting the computer using the power button rescues this behavior.
3/20/06: Boot from Tiger update disk, run Disk Utility Program. Did "repair disk"-> "Volume Header" needed minor repair. Did "repair disk permissions".
3/21/06: do chat with techs (2 sessions). Tech suggests pressing the SMU button inside (which I'm not altogether comfortable with, as the machine is heavy for me), and also suggests booting from the Apple Hardware Test disk and running the hardware test. This proves to be impossible; after booting while holding down either the "C" or "option" key (I tried both), the cursor would be unresponsive (stuck in the upper left corner of the screen). I'm using a non-Apple trackball instead of a mouse (but could run the HTD last fall when I had the logic board failure using the exact same trackball).
3/22/06: spoke with AppleCare tech. He also suggests pressing the SMU key. This time I try it, only to find that the screws had been stripped when the logic board was replaced in October, and that I can't remove the back the chassis. He then suggests that I run the Tech Tools disc that came with AppleCare. I do so; it takes about 6 hours. The report resulting says that everything passed. However, when I restart the machine, I get a grey screen with a black square with text saying that I must restart the machine (this is the same screen I got when I had the repeated kernal panics in October). I was able to boot from the Tech Tools disc, and ran it again. THis time it ran much faster, however, I still couldn't restart the machine. I also couldn't eject the Tech Tools disc. I made another call to AppleCare the next day. The tech who answered said it definitely sounded like a hardware problem, and suggested that I take it in for repair.
3/25/06: I take the machine in to the Apple Store at the Cambridgeside Galleria. The Genius is able to start the machine from an external drive, but can't access my hard drive. I leave the machine for repair, and retrieve it on April 3.
4/03/06: The repair techs wipe the hard drive, reinstall the operating system, and replace the chassis. They say they can't reproduce the problem. I bring the machine home, and restore some of my files from my external backup drive. Within 4 hours, the rhythmic "tongky tongky" noise and accompanying crash recur. I restart and get another crash with 20 minutes.
4/04/06: I call AppleCare; the tech refers me to someone higher up. She has me boot from the Hardware Test Disk. I again have the frozen cursor problem. She talks me through running it using keyboard commands. Two hours later, my computer passes all the tests. She say there must be a problem with how I have my preferences set, and suggests creating a new user (which I haven't yet figured out how to do), and to keep track of when the machine crashes again, and what programs I'm running.
4/10/06, 10:15 PM: Machine starts making a different noise (again from the left side). This time it's a slower ticking, more a clicking noise. I have open: Safari, Firefox, Mail and Preview (I will note that I had not downloaded and installed Firefox before the earlier crashes); I'm also connected to the external drive via FireWire. I restart the machine successfully.
At this point I'm noticing some other odd behaviors:
I have to force-quit Mail (i.e., quitting from the pull-down menu doesn't work, nor does quitting from the dock)
• The machine goes to sleep after a few minutes of being idle (I have the "start screen saver" time set for one hour)
• The screen saver does not come one when the machine puts itself to sleep; it goes straight to the black screen
• The machine wakes up slowly, and programs open slowly, and sometimes respond slowly (I have a gig of RAM).
• Image icons show only the application icon, not a thumbnail of the image (I saw thumbnails before the most recent repair).
4/13/0, 3:46 PM: Sudden start of "tongky tongky" noise. I have open Safari, Firefox, Mail, Preview and Quicktime (the latter two have no documents open). Again, I can't shut down from the menu, and have to use the power button.
3:54 PM: "tongky tongky" noise recurs, this time interspersed with a "whirr-click" noise. I discover that I actually can shut down the machine from the menu bar; it turns out that the response is very slow...it takes minutes to respond to a command.
5:00PM: "tongky tongky" noise recurs. I'm running Safari, FireFox and Mail. I don't do anything, and it resolves for a while.
5:30 PM: No weird noises, but nothing but the cursor works. I can't click between different open windows. I power down using the power button at 5:33.
11:30 PM: Machine makes ticking and whirring sounds (again from the left side). The machine's response is very slow when this is happening. I'm running FireFox and Safari.
I'm now noticing a few more weirdnesses: RealPlayer flies now have a blank white rectangle icon, rather than a RealPlayer icon. Also, I can no longer play music samples on Amazon (neither RealPlayer nor Windows Media Player). I know these are both minor issues, but it's still yet another functionality that my machine has lost since early March.
I strongly suspect that my hard drive is failing. Do my problems sound like they might be due to something else? However, I can't seem to get the AppleCare or Apple Geniuses to acknowledge that I have a hardware problem. Am I likely to have a better service experience if I take my machine to an Apple-authorized dealer other than the Apple store?
Thanks for any advice you can offer!
iMac G5   Mac OS X (10.4.6)  
iMac G5   Mac OS X (10.4.6)  

The Best Answer

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Thanks for the answer. I've been backing up my data all along. The Apple Care phone support people have been insisting that it must be a software problem because of the extended hardware test showing no errors. When I took my machine to the Apple Care store, they only wiped the hard drive, reinstalled the OS, and replaced the chassis that had been damaged in an earlier Apple Store service visit.
I forgot to mention that I've also replaced one of the RAM cards (which failed the EHT in October, when the logic board also failed), so I'm now on my third problem. I've done a bit more examination of the machine, and I'm fairly sure I've got a Rev A iMac. The serial number falls within the range of the ones that had problems, though mine aren't the ones described on the info page.
I've been trying the Apple Care suggested solution of creating a new user (the last Apple Care person I spoke to insisted that the problem was created by some bad preferences). I haven't yet had another experience of the "tongky" noise followed by the response slowing to a crawl, but I do hear an ominous single click several times a day. Response times continue to be sluggish (again, I have a GB of memory), and the machine continues to go to sleep after about 5-10 minutes of being idle (I'm currently set for one hour), with the screen saver never coming on.
I guess my bottom line question is what exactly do I say to Apple Care to convince them that I've got a hardware problem and get them to replace the hard drive?