This may be a silly question, but does rebooting help? Immediately after a reboot, do most applications work OK? In general, is it just your browser that is really slow? ...most of the time, anyway? I do see your post above where you say that pretty much everything is being really slow.
One other related question. When you first start up your Mac after it has been off for an hour or more, are things more normal? I am wondering if you have a heat problem going on here, perhaps a fan failure? When you first start up, it would take a few minutes for things to start overheating. In that interval, if all was well, you would know that this is what you might be up against.
There is a widget called iStatPro that contains some wonderful temperature sensor display information, but I am not sure if it works for iMacs. Can anyone reading this comment?
Before you take the plunge and reformat, try this first. Get OnyX from
http://www.titanium.free.fr/pgs/english.html and run its suite of cache and other clean up capabilities. Clear out everything that it will clear. Then restart (this first restart will be quite slow, as Mac OS X has to repopulate a lot of caches). Now are things any better?
If this doesn't improve things, and the fan/heating theory above doesn't bear fruit, I would agree that the reformat is your last desperate measure. If that doesn't work, you will have to take the make in for service. I would be suspecting a partial hardware fault at that point... a disk drive that was starting to fail, RAM that was giving out, something like that.
Sorry I couldn't be of more help!