Q: Lion install fails because recovery can't be created. Support article suggests that recovery partition is not required.

Do you have a Boot Camp partition on your drive or another partition on the drive or is the drive full?

Was the drive partitioned using GUID and formatted Mac OS Extended, Journaled? Unless the drive is otherwise damaged you should not see that error. You can check these out using Disk Utility. I would suggest that you do the following:

Repair the Hard Drive and Permissions

Boot from your Snow Leopard Installer disc. After the installer loads select your language and click on the Continue button. When the menu bar appears select Disk Utility from the Utilities menu. After DU loads select your hard drive entry (mfgr.'s ID and drive size) from the the left side list.  In the DU status area you will see an entry for the S.M.A.R.T. status of the hard drive.  If it does not say "Verified" then the hard drive is failing or failed. (SMART status is not reported on external Firewire or USB drives.) If the drive is "Verified" then select your OS X volume from the list on the left (sub-entry below the drive entry,) click on the First Aid tab, then click on the Repair Disk button. If DU reports any errors that have been fixed, then re-run Repair Disk until no errors are reported. If no errors are reported click on the Repair Permissions button. Wait until the operation completes, then quit DU and return to the installer.

If DU reports errors it cannot fix, then you will need Disk Warrior and/or Tech Tool Pro to repair the drive. If you don't have either of them or if neither of them can fix the drive, then you will need to reformat the drive and reinstall OS X.

Try installing Lion again.

There has been reports of this happening for some odd reason when there is to much free space or something to do with the alignment of the drive. Try creating a second partition of any size, say 100GBs, and then try the install again.

Launch the Console application in any of the following ways:

☞ Enter the first few letters of its name into a Spotlight search. Select it in the results (it should be at the top.)

☞ In the Finder, select Go ▹ Utilities from the menu bar, or press the key combination shift-command-U. The application is in the folder that opens.

☞ If you’re running Mac OS X 10.7 or later, open LaunchPad. Click Utilities, then Console in the page that opens.

Select "/var/log/install.log" from the file list. Post the messages from the last installation attempt, starting from the time when you launched the Installer or Software Update.

Post the log text, please, not a screenshot. If there are runs of repeated messages, post only one example of each. Don’t post many repetitions of the same message.

Important: Some private information, such as your name, may appear in the log. Edit it out by search-and-replace in a text editor before posting.