£40 is not that bad and may be worth it to find out the true cost of repair.
Your 4 year old iMac, assuming it was new when you got it, should be capable of running Lion, mine is, (possibly Mountain Lion as well) and may be worth fixing if the price does not exceed its retail value.
However, if you are looking for a reason to replace the iMac, this might be the good reason you have been looking for.
I'm a newbie so please be gentle! lol!
I have a dilemma: I have a 4 year old iMac that runs OSX Leopard 10.5.8 and has worked like a dream for the last 3.5 years. I use my computer primarily for music production and it has coped well with the software that I install i.e Logic 8 etc.
What I started to notice when I turned on the computer was that the fans went crazy and my computer sounded like a jumbo jet. I did the system reset like Apple advised and things went quiet about a week ago, the fans went mental again and no matter what I did (and I have went on all the forums) the fans won't quiet down.
Following the advice from Apple, I did a Hardware test and the iMac said that my temperature sensor has malfunctioned. I downloaded iStats and it stated that my CPU fan was going 4x the normal rate.
Because I am out of warranty, I have rang a number of Apple Repair Shops and they told me that it could be many things but chances are either the fan needs replacing or it could be something to do with the logicboard, but they will need open it up to find out which will cost me minimum £40 (roughly $70). I checked the value of my current iMac and the best I could get for it if I sold it was £250 - £300 ( roughly $480 - $550) so if I have to replace the Logicboard it may not be worth the cost.
Also, a lot of new software will not run on Leopard anymore but with these problems, I'm thinking it won't be worth it & once you get 1 problem, chances are that the repairs will be more frequent.
Guys please let me know what you think.