As for installing OS X 10.7 Lion after you do the firmware upgrade.
Here is the procedure I used:
Step 1: Create a new partition for the installer. I used an 8Gb USB flash drive.
Using Disk Utility, create a new partition to install Lion from
• Name: LionInstaller
• Size: 7.0 GB (or bigger)
• Format: Mac OS X Extended
• Partitions: Single partition - GUID Partition Map
Step 2: Mount the Lion installer image.The installer image is inside the 'Install Mac OS X Lion' app. Right-Click on the the app and select "Show Package Contents". In the Contents:SharedSupport folder is the InstallESD.dmg image file. Double-Click on the InstallESD.dmg image, and it will mount as 'Mac OS X Install ESD'.
Step 3: Mount the Base System image.The Lion installer image contains some hidden files, to get to them you'll need to use the Terminal, from the terminal prompt you can give the following command (
$ is the shell prompt):
$ defaults write com.apple.Finder AppleShowAllFiles YESAfter the command is executed, RELAUNCH the Finder (Choose Force Quit from the Apple menu; select Force Quit...; select Finder and click Relaunch)
From the mounted 'Mac OS X Install ESD' image (it looks like a disk on your desktop). Find the the hidden file BaseSystem.dmg. This is the system that will be used to boot the installer. Double-click on BaseSystem.dmg and it will mount as 'Mac OS X Base System'.
Step 4: Copy the base system.The entire contents of the base system need to be copied to your 'LionInstaller' partition. You will use the 'Restore' feature in Disk Utility to do the copy.
If it is not already there, drag 'Mac OS X Base System' mounted image to the left-hand sidebar in the Disk Utility. Select it from the sidebar. Click on the Restore tab-button at the center-top of the Disk Utility window. If you selected 'Mac OS X Base System' it should be listed as the Source. For Destination, from the upper portion of Disk Utility sidebar, drag the 'LionInstaller' partition you created in step 1 to the Destination field.
Once the Source and Destination are set, click the actual Restore button (say yes to the "Erase destination" prompt). Disk Utility will do a block copy that will take a few minutes. (Once it is finished, you can eject the BaseSystem image, it is no longer needed.) You will notice that your LionInstaller partition is now named 'Mac OS X Base System'. Rename it back to 'LionInstaller'.
Step 5: Copy the installation Packages.Before the packages can be copied from the Lion installer image, there's a symbolic link in your 'LionInstaller' partition that needs to be deleted.
$ sudo rm /Volumes/LionInstaller/System/Installation/Packages
$ sudo cp -R /Volumes/Mac\ OS\ X\ Install ESD/Packages /Volumes/LionInstaller/System/Installation/PackagesThe copy (cp) command will take a few minutes since it's copying 3.2Gb of data to your LionInstaller partition.
Step 6: Delete the PlatformSupport.plist fileThis needs to be done to allow the 'LionInstaller' partition to boot properly
$ sudo rm /Volumes/LionInstaller/System/Library/CoreServices/com.apple.recovery.boot/PlatformSupport.plistStep 7: Copy the OSInstall.mpkg to your 'LionInstaller' partition.Unzip the attached file (see note at end of Step 11) and then replace the OSInstall.mpkg in "/Volumes/LionInstaller/System/Installation/Packages". You can simply drag and drop the file to the System:Installation:Packages folder of your 'LionInstaller' partition.
Step 8: Install LionReboot your machine and hold down the 'option' key and choose to boot from 'LionInstaller' (it might be called "Mac OS X Base System" depending on if you mounted and then remounted your partition or not). When system comes up, it should automatically launch the Lion Installer. Go ahead and go through the Install. This installation is an UPGRADE, and it will install Lion over Snow Leopard thus saving all your settings, applications, data, etc. [However, be safe and make sure you have a backup of your important data - Murphy's Law and all!!!!!].
Step 9: After the installer has completed reboot your machine back into the 'LionInstaller'At the end of the installation your Mac will reboot and your machine
will refuse to boot into the Lion. Don't worry you just need to delete one file to get it to finish the install and get it to boot into Lion. When the installation fails, hold down the power button to do a hard re-boot. Once again hold down 'option' and choose to boot from 'LionInstaller'. This time instead of starting the install process choose to run Terminal from the Utilities menu.
From terminal you need to delete the following file: "/Volumes/'name of your new lion partition'/System/Library/CoreServices/PlatformSupport.plist". For example I installed Lion to a drive named Macintosh HD, thus I issued the following command:
$ sudo rm /Volumes/Macintosh\ HD/System/Library/CoreServices/PlatformSupport.plistStep 11: Reboot your machine into Lion 
Giving credit where it is due...
Most of the above comes from post #8 on the follow page:
http://www.insanelymac.com/forum/topic/249877-how-to-install-lion-on-any-coreduo-mac-upgraded-to-a-core2duo/I clarified some the explanations as well as fixed the quotes in the Unix commands so you could just cut and paste the commands to Terminal.
[Edit]: You will have to visit the above credited site to get the file. At 544kb it was too big to upload here.