I had the exact problem on my macbook pro 15 insatlling Mtn. Lion that has been discussed here, endless loop after "damaged HD", couldn't load back into SL, finally i followed this and it worked perfectly for me, except i was installing Mtn. Lion, not lion, thank y'all so much, i thought it was way worse than it was!
bart2906
Ok, I managed to resolve my problem.
I couldn't repair the disk using the Mac OSX ultilities Disk Utility that appeared during the Lion Installation. I pulled out my Snow Leopard disk, and ran Disk Utility there. Same problem, it could not repair the disk. I then tried the following:
1. In disk utility(when booted on my Snow Leopard disk), I unmounted my partition(mine was called Macintosh HD). To do this I clicked on my drive and clicked the Unmount button. I then quit Disk Utility.
2. I then opened Terminal(also found under Utilities on the Snow Leopard disk). When that opened I entered fsck_hfs -rf /dev/disk0s2. This took about 10-15 mins. It eventually ended and said that it had repaired my disk. Success! I closed Terminal. Your partition may be called something other than disk0s2...make sure you know what it is.
3. I went back into Disk Utility(while still booted on my Snow Leopard Disk), mounted my Macintosh HD drive and reran verify disk. This reported no problems!
3. I then restarted my machine and held down the Option button. Instead of seeing OSX Installer that I had seen when I had got stuck in the Lion installation loop, I had my Macintosh HD drive back! (and my Bootcamp partition)
4. Once logged in, the Lion installation app was still in my dock, so I clicked on it again, and this time it installed no problem.