Thanks for the suggestions but so far they aren't working... I updated my USB thumb drive with a different Chameleon release and now I get a different error...
Here is what I've done so far...
1) In Disk Utility on my Real Mac I formatted an 8GB Thumb drive into two Mac OS Extended (Journaled) with GUID partitions 6.5GB (For OSX Lion 10.7.4) and 1.5GB (For Supporting Tools)
2) From a purchased Lion 10.7.4 installer via the Mac App Store I mounted InstallESD.dmg from Applications/Install Mac OS X Lion.app/Contents/SharedSupport and ran "open /Volumes/Mac\ OS\ X\ Install\ ESD/BaseSystem.dmg" in Terminal.
3) In Disk Utility I selected the 6.5GB partition and chose the Restore Tab. I made "Mac OS X Base System" the Source and "OSX Lion" (the 6.5GB partition) the Destination.
4) After that was finished copying I renamed the partition back to OSX Lion as I prefer that name over "Mac OS X Base System" <-- I tested this without renaming and had the same results.
5) I opened the newly restored partition on the USB thumb drive and went to System/Installation and removed the Packages alias and replaced it with a folder called Packages.
6) In Terminal I typed "open /Volumes/Mac\ OS\ X\ Install\ ESD/Packages" and copied the contents to the new Packages folder I created on the USB Thumb drive
7) I then ran Extra Lion from this Tutorial (http://www.insanelym...howtopic=256729
) and then ran Chameleon-2.1svn-r2059 which I had previously downloaded, making sure in both instances to select the USB Thumbdrive as the Destination for installing to.
8) Following that I plugged the USB Thumb drive into the Optiplex 755 MT and power it ON and press F12 to get the Boot Menu.
9) In the Boot Menu I select "USB Device"
10) I choose "hd(0,2) OSX Lion with no option (See attached) <-- this is my USB Thumb drive from above
11) I get the Error "can't find /mach_kernel" (See attached)
Any ideas as to why it can't find it? I've attached the Chameleon Installer Log and a screen cap of the Thumb drive contents incase those are helpful. The system installed and booted up fine under Chimera earlier so BIOS settings and hardware should be fine.