I had the same issue with Logic Pro 9 when I updated to Lion. Also, GarageBand would not "Initialize."
This was my fault of course:
When I finished the (Lion) installation I ignored the "Incompatible Software" warning folder, and went ahead and continued editing my Pro Tools LE 8.04 sessions as well as Logic Pro 9 sessions. I was pleased that the apparent "Incompatible version" of Pro Tools continued to work. That is, until the next day, when I tried to open a logic session it froze on the "searching for Midi drivers" screen. Eventually it would open, but, it would not run.
After searching for a practical solution. I gave up and stuck my Pro Tools LE 8 disc in and did a "FULL CLEAN UNINSTALL." As a precaution I also deleted "Melodnye stand alone". Although I believe the true melodyne incompatibility came from the Pro Tools disc. Which included a "ReWire" version. I rebooted, and, everything worked fine.
The moral of the (MY) story is:
-Upon updating your OS, Take Apple's precautions seriously. They know what they're doing and I'm thankful that they are wise enough to quarantine software that will screw up drivers.
-Also. I had heard that Pro Tools was compatible with Lion, yet, I failed to further investigate that PRO TOOLS LE 8 IS NOT COMPATIBLE WITH LION! Only versions 9 and up. I believe that means M powered 9 is compatible too (but don't quote me on that). I'm ok with that, as i've grown to like Logic more. Although, I hate to see money go down the drain.