Restarting holding down the option key showed a 10,8 recovery volume. Selecting that for restart also brings up the Apple logo & the gray circle of death.
I'm not sure apple realizes what a pain this is to not have bootable Optical media, or to wipe the drive and install fresh -- Native Instruments Komplete took over 8 ckufing hours to install, and all my drives are 1TB 7200rpm, not slow pos drives like apple usually bundles with Macs.
Make sure your backups are up to date, as those symptoms could indicate your Boot Drive is failing.
Erasing and re-writing the drive (either with security erase write Zeroes, OR as you have done by re-Installing everything) will cause the drive to spare out any Bad Blocks and should give 100 percent good blocks going forward.
If you had presented this problem to a technician is a professional setting, the most expedient solution would have been to replace your Boot drive, then hand the old one back to you to re-write and possibly re-purpose for Backups or some other use at your leisure.
In that setting, they can not afford to take the risk that the drive re-writing might fail after several hours of invested effort.
So by your diligence, you have probably saved yourself the under US$100 cost of a new drive.
I am constantly telling people to invest in bootable backups (clone) using Carbon Copy Cloner 3.4+ a good investment which also puts a recovery volume on the backup.
And to have a small emergency system maintenance volume as well, 30GB is more than enough.
And I have said so not just since the advent of Lion and Optical less systems but since 10.2.4, 10 yrs ago.
Apple has included WD Black 640GB and 1TB for the last 4 yrs at least, they included "POS" maybe back in 2006 but then I would have said so what, use it for backup emergency only anyway and use 10K WD Raptor of my own (or VR later, and now SSD).
Clone before making any changes or update or installing anything unless your system backup clone is current enough and you have all the tools. And keep everything that is NOT OS and apps on another drive. And use TimeMachine in addition.http://www.macupdate.com/app/mac/7032/carbon-copy-clo
Create an OS X Lion Install disc
How to clone your system:
You can have your bootable DVD or CD or flash boot drive or thumb drive.
Something - and how to - that is well known since Lion came out 2 yrs ago.
The lack of DVD media is fine. And on Macs that support a network install (and network initiated AHT as well) all done from system UEFI firmware - sans optical drive. The Mac Pro design is or was 10 yrs old basically and would have post Lion if a new model had some out.
I haven't seen a Microsoft Windows system fail as miserably as my Mac Pro under 10.84, at least not since prior to the release of Windows 7 four years ago. Thankfully I was able to recover my email and my preferences from the 10.84 boot volume, but the time lost to failed attempts to fix (over 60 hours, 46 of them in Tech Tool Pro) and then rebuilding the darned thing has been a good lesson [in addition to installing Native Instruments Komplete 9 upgrade on my 10.75 disk, I've also had the joy of installing Pro Tools 10.35 plus a ton of plugins for Pro Tools and Logic]. I cannot recommend Tech Tool Pro 6.x based on this experience -- it ran for hours and hours without any kind of sign that it was doing squat. My main takeaway from this experience is that I'll need to make a full CCC backup before even performing the most minor of updates from Apple. This stinks.
I've long been a fan of Carbon Copy Cloner, but I have never had such a massive failure with 10.68 which has been super-stable -- unlike 10.7, which a couple of years ago deleted several freshly recorded Logic tracks from a Finder operation as I had attempted to make a backup, with zero recovery possible. I recently ccc'd my 10.58 volume to a 1TB drive so my Mac Pro is outfitted with 4x 1TB drives, each with a bootable OS. Newer is not always better. I've been helping other people to update their systems for years, but at home, I just want my stuff to work reliably.
To this ends, I have a FW800 Drobo with many TB available. Since most of my data is on the Drobo I haven't worried too much about backups -- I usually duplicate the most important files between my Mac's Drobo and my PC's Drobo (Windows Server 2008) and I assumed that a point release (10.83 to 10.84) would have been adequately tested by Apple before releasing it to consumers. My bad. Drobo does not equal RAID, and it does not equal backup. But it is a security blanket. I've replaced the 2 year old drives in the Mac Drobo with newer, larger drives (WD Red 3TB) so the used drives (5 year warrantied WD Black 2TB) are now running in the PC Drobo. Most days, the PC isn't even booted.
By the way, if Apple's going to take up hard drive space for a nifty 10.8 recovery volume, that should work. It did not. I have attempted to perform OSX installations from USB media and they have worked exactly 50% of the time -- not a real confidence builder. It was dumb for Apple to stop making installation discs, because although the drive technology is old, it still works.
I wouldn't waste my time with the "professionals" at my local Apple Store. Forget all you've read in the glowing accounts of how cool they are to customers when you walk in with your problems. The guys in my local store may as well be working for Best Buy -- they're not very bright or experienced. They wouldn't know a failing drive if it fell on their foot. And since working for our town's Apple VAR, I've learned that I'm better off going to forums like this or to Chicago if I need answers and honesty.