In first place sorry for my english.
The same happened to me. A friend brought me a Compaq nx7400 notebook with same symptoms as you describe.
But when i power on the notebook, screen turns on and i should be looking on that big HP logo, but all i get is that "rainbow patterned" and blurry unreadable image. There no icons on the desktop, just big blurry rainbow image.
I hooked it to my LCD monitor via VGA cable hoping the problem is in the notebooks screen, but it wasn't. Almost the same image on the external monitor. Something like 256 colors mode and a lot of red in the screen.
When you're patient enough and you press "accidently something" the screen then sometimes come to normal until you reboot that machine.
So the problem is in the onboard Intel graphic card. Warranty is gone, and the replacement won't be cheap on a 3 year notebook i guess. How much can the replacement cost ?