Where is the Incompatible Software folder? Spotlight doesn't find it.

If it exists, it's at the root-level of your Lion boot volume.

So how do I find the Lion boot volume in finder - now I've upgraded I can't see the boot volume in the devices list...

Click 'Finder' in the Dock. From the menu bar at the top, choose

Preferences > Sidebar

and look down to 'Devices'. Check the box next to the name of your HD. You'll now see that on the left in every Finder window.