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Apple has some firmware upgrades for the ATI Radeon 2400/2600 series of video cards. Not sure if yours is one of them, but you may want to give that a shot. Did you do the hardware test? (USE the disks that came with your computer).

If you are worried that it's hardware, run the apple hardware test. (I honestly don't know what would cause the snow effect, but I'd definitely be thinking hardware). Insert OS X disc 1, turn the mac off then back on and hold down the D key. Choose language for the test and run the test. If...