Strange display problem


OK, I have posted this problem elsewhere and while I have received excellent help from other OS X boards, no one seems to know what is causing this problem.

I have a G4 Digital Audio 533 that was given to me by my wife's company. They were getting rid of it because when 10.2 was installed, a strange issue with the display of fonts arose. During the installation and afterward during normal use, random characters are missing from the screen or all of the characters in a sentence are stacked on top of each other. I have some screen shots below. It happens in all applications and I do not know if this was an issue prior to installing 10.2.

They sent it to a local Mac repair shop and they were told that the logic board was bad. However I ran the Hardware Test Disc and all of the components passed without issue. I have reinstalled multiple times, cleaned the font cache, repaired permissions...... Nothing has done the trick. When I do a verbose start up the system does hang for about a minute at the line:
Jun 16 21:01:17 localhost kernel: From path: "/pci@f2000000/mac-io@17/ata-4@1f000/@0:9,\mach_kernel", Waiting on <dict ID="0"><key>IOPathMatch</key><string ID="1">IODeviceTree:/pci@f2000000/mac-io@17/ata-4@1f000/@0:9</string></dict>
For a better idea of the context, a section of the system.log

Jun 16 21:01:17 localhost kernel: 
Jun 16 21:01:17 localhost kernel: using 327 buffer headers and 327 cluster IO buffer headers
Jun 16 21:01:17 localhost kernel: Adaptec warning: Resetting SCSI bus.
Jun 16 21:01:17 localhost kernel: Local FireWire GUID = 0x393ff:0xfe0f59c4
Jun 16 21:01:17 localhost kernel: Security auditing service present
Jun 16 21:01:17 localhost kernel: BSM auditing present
[COLOR=Blue]Jun 16 21:01:17 localhost kernel: From path: "/pci@f2000000/mac-io@17/ata-4@1f000/@0:9,\mach_kernel", Waiting on <dict ID="0"><key>IOPathMatch</key><string ID="1">IODeviceTree:/pci@f2000000/mac-io@17/ata-4@1f000/@0:9</string></dict>[/COLOR]
Jun 16 21:01:17 localhost kernel: Got boot device = IOService:/MacRISC2PE/pci@f2000000/AppleMacRiscPCI/mac-io@17/AppleKeyLargo/ata-4@1f000/KeyLargoATA/ATADeviceNub@0/IOATABlockStorageDriver/IOATABlockStorageDevice/IOBlockStorageDriver/WDC WD205BA Media/IOApplePartitionScheme/untitled@9
Jun 16 21:01:17 localhost kernel: BSD root: disk0s9, major 14, minor 9
Jun 16 21:01:19 localhost kernel: Jettisoning kernel linker.
Jun 16 21:01:32 localhost kextd[87]: registering service ""
Jun 16 21:01:33 localhost kernel: Resetting IOCatalogue.
Jun 16 21:01:37 localhost kernel: Matching service count = 2
Jun 16 21:01:38 localhost kernel: NVDANV10HAL loaded and registered.
My question is has anybody ever seen anything like this and how can I fix it? I am reluctant to purchase a new logic board solely on the opinion of this shop. They are quite expensive, ranging from $150 on ebay to $500 from a retailer. At $500 it's not even worth it because I could by a comparable used system for about the same price.

Thanks for any help you can offer,

Actually, that's waiting on the hard drive. Does Disk Utility show the S.M.A.R.T. status of it? It could be that the hard drive is failing.
S.M.A.R.T. status is Verified. What if I were to boot off of an external drive?

Also, booting into OS 9.2 gives no sort of visual error. Everything looks great.
I installed os x on a firewire drive (from my iMac), plugged it into the G4 and set it as the startup disk. Upon rebooting the display is perfect. I have never heard of a hard drive malfunction causing issues like this. Now all I have to do is get a new internal drive for the G4.

And to think, the repair shop was going to charge ~$500 to replace the motherboard when the problem was simply a $40 hard drive.