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iMac with startup issues

I currently have a client who has an older iMac (guessing 6 years old) that worked fine at their house but when they brought it to their work turned on normally. They couldn't get Internet access so they inserted a AT&T disk into the drive and attempted to install the start package (yes, it was also for Mac). When the screen froze they called me in and when I arrived I waited 20 minutes for the screen to release which never did. So I did a hard reboot.

The iMac boots up  and gets to the gray screen with Apple logo and the spinning gear. After a few minutes it reboots itself and repeats. I have tried resetting the PRAAM and the SMC with no change. I have tried to boot from cd and it won't boot to a cd. I have tried safe mode and it doesn't go to login screen after holding down the key combination.

I am at a loss as to why the drive wouldn't boot after a hard reset. I hate to have to open the box open if there is a quick fix. I did use some of the information from this website http://macs.about.com/od/usingyourmac/qt/Mac-Stalls-On-Gray-Screen-At-Startup.htm
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Aaron Tomosky
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Are you pressing the left alt at the right time to get the boot menu? You can try a boot USB if the cd drive is damaged
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TopTierIT

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You mean the option key to get to the boot menu? All it brings up is the Macintosh HD.
Which cd is in the drive? Have you made a boot USB on another computer and tried that?
not on USB. I am not sure what native OS is on the iMac now. I have a Lion OS X Install disk I made. Can I use that and transfer to USB? BTW I have the OSX Lion files also on my computer. It's a PC though....
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Aaron Tomosky
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I'll try that a little later on if not tomorrow. I'll update as soon as I get that USB.