I also just had a problem in which my MBP wouldn't boot, but got stuck to the gray Apple logo. HDD seems to be dying; after I booted with the command line visible, I saw it get stuck at a disk0s2: I/O error. Booting with cmd + R held down got me to the OSX Recovery though (I've got Lion installed) and after I reinstalled Lion, everything came back totally fine. It doesn't actually completely reinstall it, but just writes over it and thus repairs the previous install, and my issues were probably caused by corrupted Snow Leopard era kext's that got fixed. I only had to run software update to get e.g. iTunes back to 11, since the reinstall rolled them back.
Oh well, I need to upgrade to an SSD anyway, at least I have one less reason to procrastinate on it now.
Seems it's with the GPU though with yours. I had an early 2008 MBP before this one which also had the 8600GT, and it was indeed under extended warranty because the chip had a known issue. Sold it after 3 years of use though, never any issues except the lens in the superdrive getting dusty from never being used.
