I would at first guess that this is a software problem. Have you tried booting from the OS DVD?
If you can do that successfully, use the Disk Utility application (detailed instructions [http://kb.wisc.edu/helpdesk/page.php?id=3810|here]) to check the disk and disk permissions.
If that fails, try using TechTool or DiskWarrior or some other program (I hope you have one of these, they are essential tools) and try to find the problem that way.
Barring that, I don't know what could be going on. Just make sure no keys / mouse buttons are being pressed on startup; this can cause some STRANGE problems that you wouldn't expect, and an inadvertent key press can cause a lot of troubleshooting pain (I speak from personal experience on this).
Let me know how this works!