iMac 2007 with accelerated graphics problems and kernel panics
Try this ( http://blog.krzysztof-turek.com/apple-imac-8-1-freeze-problem-solution-en/ ) I had the same issues ; display frozen but pointer moving but no kernel panic on a mid 2007 imac 2.0 ghz and running osx 10.8 Mountain Lion. the kext swap worked for me . Good Luck