Clean Install: Recovery system can't be created

I have a late 2007 white Macbook.  I installed a 320 GB drive into the optical bay and my O/S drive was a 120 GB OCZ Vertex+
I had previously had a Crucial M4 as the OS drive for months.  I used SuperDuper to clone it to the OCZ about a week ago and had no problems.
The system was running fine until a few days ago when it started acting weird, so I tried to reboot.  I got the blinking folder with a question mark and couldn't do anything else.  I was able to recover some of my data off of the SSD using my brother's MBP and DiskWarrior.  I also created a 4 GB Lion bootable USB.
I erased the SSD using disk utility and then tried to run the installation, but I keep getting "Mac OS X can't be installed on the disk XXXX, because a recovery system can't be created."
Any help would be much appreciated.

Well, you cannot see the Recovery HD partition and formatting (erasing) the drive does not remove it. Only partitioning the drive will remove it. The error you are getting is the error produced when there is another partition on the drive that cannot be altered or the drive is not prepped correctly or a Recovery HD partition already exists or there is something corrupted on the drive.
I suggest that you boot from your installer flash drive and use Disk Utility to repartition the SSD:
Drive Preparation
1. After DU loads select your hard drive (this is the entry with the mfgr.'s ID and size) from the left side list. Click on the Partition tab in the DU main window.
3. Under the Volume Scheme heading set the number of partitions from the drop down menu to one. Click on the Options button, set the partition scheme to GUID then click on the OK button. Set the format type to Mac OS Extended (Journaled.) Click on the Partition button and wait until the process has completed.
4. When done quit DU and return to the main menu. Select Reinstall Lion and click on the Continue button. When prompted click on the option to See Other Disks then select the SSD as the target.

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