If you buy through the HE store you will get 3 years parts and labour cover for free along with 1 years phone support. You can then choose to pay £58 to extend the PHONE support to 3 years, but to be honest it's not worth it when you can use the internet for free anyway.
If you buy normally you will get 1 years parts and labour, and 3 months of phone support. You can then choose to pay £200+ to extend the coverage for the PARTS AND LABOUR to 3 years.
If you're willing to blag you can get a 14% discount from the Apple store (through the HE store) and you'll get ample cover from the basic HE coverage. Additionally, if you don't plan on keeping the iMac for 1 year+ you can just sell the iMac on and you're still covered (if you don't blag it)
I had a problem with my 24" iMac (DVD slot ate a CD) and Apple repaired it within 3 working days.. and that was pickup to re-delivery! I was very impressed, however, this has put me off the iMac. That's not to say I don't think they're reliable.. I had a previous iMac for a good 2 years and it was flawless.
They could be repaired by yourself, or a local Apple reseller, however, anything other than a bad set of RAM would prove costly, and EXPENSIVE to fix yourself. A good site for guides is
http://www.ifixit.com, where you can follow step by steps on almost any part installation.
To answer your next question.. yes, the coverage is transferrable if you decide to sell in the future