Hi,
Lion Gm is lion retail, so ... No problem ...
Upgrade can be done successfully installing over the mac osx snow leo.
You must use a Chameleon which can read snow leo and lion ( from 2.0-RC5-r752 and higher).
The kexts are hardware specific, so i indicate the minimum ones ...
Look my other post
Qe/ci depends on video card (your Ati radeon 4870 is supported)
Put GraphicsEnabler=Yes on com.apple.boot.plist

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iMac: Mac OSX Leopard 10.5.6 (iDeneb v1.4) - CPU: Intel Core 2 Duo E4400 @ 2.0Ghz - MB: ECS P4M890T-M2 - RAM: 2Gb DDR2 800Mhz - Ethernet: RTL8139 - Audio: Realtek ALC662 - Video: nVidia Geforce 7300 512Mb - HDD: 320Gb SATA2 - DVD-RW: SONY DVD RW AW-G170A