I’m not sure why you thought the issue was the LCD.
You are facing a kernel error within your OS files or it could be hardware. You clearly have a logic board issue as the graphics is messed up on the display, so I would have replaced is the logic board first:
20” iMac Core 2 Duo 2.66 GHz logic board Apple P/N: Rev-1 661-4984 or Rev-2 661-5136
You likely will need to reformat and install a fresh copy of the OS this system requires if you are still getting the memory errors.