iMac reinstallation: 'Could not create a preboot volume'

Out of curiosity, did you try to boot into Safe Mode before deciding to reinstall macOS? Or run Disk Utility First Aid while booted into recovery mode?

Very likely the internal HD is failing, but it could also be a file system issue. While booted into Internet Recovery Mode (Command + Option + R), launch Disk Utility and erase the whole physical drive in order to create a new partition & file system. Within Disk Utility you may need to click "View" and select "Show All Devices" before the physical drive appears on the left pane of Disk Utility. If your iMac uses a Fusion Drive, then just erase the Fusion Drive item instead.

Keep in mind erasing the drive or Fusion Drive will destroy all data on that drive. Make sure to have a good backup before erasing the drive or you will lose your data.

jankar72 wrote:

Thank you, but I have tried all those steps already.

If you have tried all those steps set forth by @HWTech, then I'd agree with them that your internal drive is failing.

Right, I managed to install macOS Sequoia on an external hard drive and boot the iMac from there. I then transferred all my data back from a time machine backup. But now everything is on the external HDD. How can I get the whole system back onto the internal HD?

If the internal drive is actually failing or failed, then there will be no getting the system back on to it until you replace that internal drive. Full stop.

At this point you have a working iMac that boots from an external drive. Very many users run their Macs every day in just this configuration. There is no reason you cannot. Should you take the iMac to a shop for evaluation and repair of the internal drive you will incur some expense, and repair of the iMac will also be at some risk of doing other damage. You might seriously consider cutting your loss and simply use the Mac as is, meanwhile saving your nickels in anticipation of replacing it with something newer before too long.

Since it is being offered up, go ahead and install macOS Sequoia.

How to reinstall macOS - Apple Support