Would love an answer to this, Seems I have the same problem...
Can't boot to CD - Just sends me to Kernel Panic screen.
Done a Hardware Diagnosis - Everything seems fine.
Can get to root via *cmd-s* and have done a fcsk, and it said everything was fine.
I have bootcamp setup, and I can get to my XP OS just fine, although the graphics is very shoddy, and just looks odd.
This makes me think it's a Graphics Card problem, but it works. Not well, but it works. Would the graphics card cause some sort of fault so that I can't load up the OSX?
Not sure how the problem came about. Was using the computer fine earlier in the afternoon, and when I came back later that night it had frozen with some graphics glitches. When I restarted, it kp'd me, so i shut it down and let it cool off. When i turned it on, it loaded the os Fine, but died after maybe 10 minutes.
Since then, doesn't matter how long it's off for it KP's me
To me, if feels like a hardware fault and more specifically the graphics card. I just don't understand how it can work, and not work at the same time.