Mac mini lion restore from USB drive - getting no-entry sign

I'm trying to recover my dead mac mini, and I'm having lots of problems. The disc is dead - I've booted in target mode and been able to reformat it from another machine, soit's working to that extent.
There's obviously no recovery system running now, and I need to get Lion running because Mountain Lion isn't supported.
I've created a few flash drives to boot from - downloading the lion install package, opening it, taking out the .dmg file and using disk utility to copy it - all as recommended by other advice.
Each time what happens is that the boot starts, then it hangs with a no-entry sign.
Any suggestions?

Which version of OS X came with your mini?

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