I also have this same problem. 
iMac 27" (late 2009)
4 Gb RAM
1 TB
ATI Radeon HD 4850

I have tried everything under the sun. ATi Drivers, Open Source Drivers,
and Propretary Drivers. Some methods have brought the screen up but with
major tearing and ghosting issues others have not done anything but move
the output to my display port. Very Frustrating.

Hopefully a fix is out soon!

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https://bugs.launchpad.net/bugs/597070

Title:
  Imac Radeon HD 4850 switch "Mini Display Port" output during install
  resulting black screen

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