Pop followed by freeze and lights dimming

So I've been researching all over the Internet for the past few hours and can't seem to find someone that is experiencing the same exact issue as I'm having with my Late '09 iMac. People have reported buzzing, clicking, or poping sounds with freezing but not their actual lights in their room dimming.

When using my iMac it will intermittently make a loud pop, sounding like a capacitor discharging. The Mac will freeze and become completely unresponsive. Sometimes the LCD will stay on and cycle through different brightness levels. Sometimes the LCD just goes black. The lights have flickered in the room a couple of times when this has happened.

iMac temps normally are 120-130 F on the HDD, CPU, and GPU but the case is normally pretty warm to the touch. Has sufficient space to breath, and usually about 72-75 F in the house. It mine as well be brand new...it has sat in the box most of its life.

I've tried resetting the SMC and PRAM. When I get off work will probably try it again, and still need to run the extended hardware diagnostic. Also tried changing wall outlets and plugging straight into the wall instead of using a surge protector. This issue just began last night. It has been working the past month in the same setup it's been in without any issues.

My question is has anyone experienced this type of behavior before? Power supply crapping out?