As Josh mentions, if you notice it responds to pressure to the left of the pad, then it's the video chip, and it's pretty much game over at that point.
If it's specifically hanging when trying to reinstall the OS, it could be that your hard drive is failing. I would connect it via firewire to a working machine, put that machine in target mode, and boot your machine in option mode, and boot from the other machine's drive. If it runs fine from the other machine's drive and does not freeze, you know the problem is your hard drive.
Also, I don't know if this machine has been worked on at all, but a lot of machines freeze because they are shorting out for one reason or another -- loose screws rolling around inside, bent shielding touching the logic board in the wrong places, etc. So if it's been worked on recently, you might want to do some exploratory surgery, and the cause of the freezing may become evident.