Migration assistant not working (10.5.8 Macbook to new Lion iMac)

Just bought a new iMac and had the Apple store update it to Lion. I fire up migration assistant on both and new iMac tells me to update software on the macbook - but there are no software updates available, I'm totally up to date.
I've tried ethernet, wireless, enabling cd sharing on both, restarting, initiating from either. Doesn't seem to be any info on this exact case online... I don't want to restore the system to get to the setup assistant because i'll lose my lion download.
Can anyone help?
For something that the Apple store said would be dead simple this sure is a pain in the a$$

CEOofTNFYA wrote:
This is absurd. I would like to take a minute to thank Apple for making sure that:
Nothing on their own website indicates that a transfer from a 10.5.8 to Lion is currently impossible.
Are you sure you've read everything on this page?
If I can read it right, it says on step 2:
"Step 2:
Make sure you have the latest version of Snow Leopard."
I'm not the sharpest knife in the drawer, but for me, that means "yon can't install Lion from any other system version than 10.6.8"
I don't think it's fair either. Leopard owners will have to buy 2 systems, but advertised, it definetely was.
Yours.
JP

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The title alone speaks to my frustration about this issue.
Used the process that was recommended by Apple to migrate from my "Lampshade" iMac (PPC running 10.4.11) to the new iMac (Intel running 10.8.2) and I got bupkiss...
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On a personal note...
I'm not bashing Apple for this...they are "head and shoulders" above the competition in what they do but I've been burned a few times so I feel I can share a small bit of loyal customer advice...I understand your iOS and mobile products hold huge sway in company focus and market-share but I find it a tad unwise to slack on the desktop applications. I don't recall any app for the iPhone/iPad family being made on the iPhone/iPad...only from desktop applications if I recall correctly. And how can I clearly "Move my Mac even further ahead" as your marketing states when I can't even migrate my files from my old Mac to my new one in a simple fashion as per your instructions?
I thank anyone in advance with an answer or even a workaround for this issue and please have a great day.

http://support.apple.com/kb/ht4889
Migration from Mac OS X v10.4 Tiger to OS X Lion
Migration from Mac OS X v10.4 computers to OS X Lion over your Wi-Fi or a wired network is not supported. However, if both Macs are equipped with a FireWire port, you can use Target Disk Mode to transfer your data:
Verify that both Macs are equipped with a FireWire port. Note that different model Macs may have different FireWire connectors, which will require an appropriate cable, such as FireWire 400 to FireWire 800.
On the Mac you want to transfer data from, Restart, and immediately hold the T key.
Wait for the FireWire logo to appear on the screen. If it does not, restart and try again.
Connect both Macs via the FireWire cable.
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Select the option "From another Mac, PC, Time Machine backup, or other disk" and click Continue.
Select the option "From a Time Machine backup or other disk" and click Continue.
Select your other Mac's volume, such as "Macintosh HD", from the list, and click Cont
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