2012 iMac boots to prohibited sign after it attempted over night self update? HDD now cannot be mounted?

There are two possibilities. There have been reports of Catalina causing some corruption to the EFI firmware partition. However, if the iMac was running auto-updates, then it should have already updated to Catalina? In which case that's probably not the case.

The other possibility is that the 7-year-old internal hard drive has failed. The computer itself seems to be working as you've booted to an external.

Drive failure often happens to old drives after an OS upgrade ("The new OS broke my drive!") because writing several GB of files to the drive is the 'final straw that breaks the camel's back'.

It's possible that the drive may mount and be read once you've booted to a Catalina OS. You might need to run third-party disk recovery software like Data Rescue.

However, if the drive will not mount at all, then data recovery becomes much more difficult. And by difficult, I mean expensive.
This is where I ask you if you have a backup.