I've made some more rudimentary observations just today after fiddling with this iMac after a little over a week since this thread began. Life was in the way this week. I have yet to try the recommendation given by NewSense. It seems like something I may have to do, but I would hope not, since that would mean continuing to use MorphOS 3.19 until 3.21 comes out.

My new observation:
These graphics issues appear exacerbated upon reboots, or maybe even caused by them. Using the iMac intermittently sees no such graphical mayhem. Rebooting just once spawns the issues and each successive reboot arrives me at the psychedelic trip that I described in the first post. This explains why I saw no graphical issues when using the MorphOS 3.20 burned CD because the iMac had no need to reboot until after the installation completed, to which the graphical issues appeared. This means that there isn't any difference between the installed MorphOS and the MorphOS CD environment when reproducing this bug.

It crossed my mind that this could be a heat-related issue with the GPU? But I used the Temps module in the Screenbar to monitor temperatures. Before the first reboot today, I observed temperatures hovering around 50 degrees C (122 degrees F). After the first reboot, the temperatures hovered around 55 degrees C (131 degrees F). That increase in temperature is negligible! After the second reboot, the temperature spiked to about 65 degrees C (149 degrees F). That's getting toasty, but still perfectly manageable. After a few seconds, the temperature easily settled to about 57 C. This doesn't strike me as catastrophic failure temperatures, so I ruled out the possibility that these graphical bugs are a heat-related issue.