I had the same problem. I had a bad hard drive and replaced it. As soon as I put it back together, the system wouldn't power on. LED1 stayed on and LED2 would blink once every few seconds after I hit the power button. After trying a new power supply with no luck, it ended up being an issue with the RAM. I wasn't getting POST beeps, but the RAM was definitely the cause of the problem. Check each RAM stick individually in the iMac and see if it powers on.