I just created a disk image of my Snow Leopard

I am hoping to install Lion on a disk image of my Mac Pro.  This disk image is currently on my desktop. The image seems to function well, and I'm now whittling down it's size.  I haven't yet created a partition on my Mac Pro, in part because I'm hopeful that the disk image is all I'll need.
My goal is to install Lion onto the disk image ONLY, because I do not want to use it except in relation to my new iPad 2.  (And I need to install Lion if I want to keep my dot mac email address after June 2011.)
Does anyone know of any reason why this planned upgrade to Lion will not work--I'm hoping that when I start the download of Lion, that I'll be asked "where do I want it installed? and that I'll be able to opt for ONLY the disk image.
Thanks for any input (especially that which is not too technical for non-techy me.)

Alinde Omalley wrote:
Thanks, Pondini.  Your answer is probably correct, but it is a bit over my head.  I found, today, that Lion said it was  installed on my external hard drive; but I see no evidence of it being there. (I had installed Lion  to an external hard drive, to which I'd already downloaded a bootable copy of my Mac Pro Snow Leopard.) 
So it should have updated the Snow Leopard installation?
Does it appear as a possible startup drive in System Prefs > Startup Disk?
I might add--all my macs met the requirements for an upgrade.  They were upgraded to the latest Snow Leopard; had enough disk space, memory, and such. 
Then as long as they're all Core 2 Duos, the drive should start them.
I'm not sure what you find confusing -- let me try it this way:
When you install OSX on an external HD, that will be a complete installation -- at least one user account, all the default Apple applications, etc., as if it's a separate computer. 
When you connect it to another Mac and start up from it, you'll be running that separate installation, not the installation of OSX that's on the Mac.  You'll log on with the user account that's on the external, regardless of what's on the internal. 
You can access the data on the Mac's internal HD (if the user on the external has permission to it), but only by selecting the HD, as if it's an external.

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