Yes, that's a problem.
Where are you getting the temperature reading from and what part is running that hot?
Most power supplies are only rated for continuous running at up to 40C... are you sure it's the PSU that's overheating?
My guess is that it's either the CPU or GPU. At 100C you are at their thermal limit. Whichever it is is likely crippling itself to keep itself from dying.
Have you tried running a program like speedfan, coretemp, or hwmonitor they should tell you which sensor/part is overheating?
When did you bring it to the apple store?
If you recently brought it to the apple store, then you should bring it back to them and explain the situation to them.
Otherwise, you likely need to either clean out the heatsinks, or you need to remove them, apply new thermal paste and remount them. Not a particularly easy task in an imac. You'd have to be careful, have the tools for it, and pretty much disassemble the whole thing.
https://www.youtube.com/watch?v=lMmZXb8plh0
a youtube guide to opening up the iMac late 2009. This one's for a PSU replacement, but it should give you a good idea at what's required.
Also, this thread should probably be moved to computer help, as a PSU would probably fail before 100C
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One interesting thing to note: there's a youtube guide for fixing an iMac with overheating issues, but that's for a different model. Also, incidentally his heatpipes actually had a pinhole leak
😵.
https://www.youtube.com/watch?v=qXso8KFG78M
