I have a mid-2007 iMac that can't boot into OS X Lion unless it's in safe mode. When I turn it on, the Apple logo appears, then the loading spinner, then a white screen with no cursor.
What makes me think it's a graphics issue is that when I boot into Lion recovery, the white screen doesn't get replaced completely by the "steel" background – rather, dragging the Installer window around kind of "erases" the white and lets the steel through, like how the eraser works in Photoshop. I'm thinking this could be related to the graphics card driver, as in safe mode it loads fine and I'm assuming it uses a generic driver there. I've tried the OS it came with (Tiger), and that installs fine but won't boot, only this time getting stuck at a blue screen instead. Oddly enough, Apple hardware test says everything is okay.
I've replaced the hard drive, reset the PRAM and SMC, and done a memory test, and I was wondering if there was anything else I could do or if my hypothesis is correct, finding an alternate way to use the graphics card.