I have been using my 2006 intel imac with an external display since I got it.
I have a 50 inch plasma connected to the DVI port with a DVI-HDMI cable, always been faultless.
Other day messing around with resolutions, as TV is 720P, so not crispy when mirrored at imac max res, I pressed the OVERSCAN button and my imac froze.

If I turn it on with the screen attached(TV can be on or off) I get the following image on my screen, I can still see the spinning beach ball, and the mouse moves.
If i turn imac on without anything attached, its fine, then if I plug cable in, it freezes, and mouse moves, but you cant click on anything,
I have tried to delete all sorts of .plist files, to no avail.
Any smart boys or girls out there have any bright ideas?

If not, its time to reinstall snow leopard as I cant live without a 50 inch plasma for viewing stuff.