It's likely that the cabling running through the hinge assembly from the motherboard to the display has gotten crimped or damaged. If the signal from the display or wireless antenna gets corrupted from a physically mangled connection, it's not surprising the OS ends up shitting itself trying to recover.
If it's under warranty, take it to your closest Apple Store. If it's NOT under warranty and there's no liquid damage, repairing it will cost, at most, $300 (2010 pricing, don't quote me on that now).
Alternatively you can crack open the case and take a look at the cabling...it might just need a little adjusting.