I don't believe the new iMacs are crap in general. However, you do appear to have a hardware problem. I've been using desktop & laptop computers since the very first ones arrived. I've been using Macintosh computers since 1991. I've never had a bad one and I've owned 7 different models.
Reinstalling a brand new operating system thats only had a few days use will make not one bit of difference. OS X is rock solid. If you had problems with the system software or system file corruption, you would be getting kernal panics, freeze ups and a spinning beach ball, NOT multicolored banded screen effects!
These symptoms are very typical for video circuitry or CPU overheating. Take it to your local Apple store, Apple Specialist or wherever you bought it ASAP. Don't continue to use it as this may cause further damage.
Good luck.