Quicktime will not play MPEG-2 after Lion updagrade

I have upgraded my system to Lion which should enable Quicktime to load MPEG-2 videos yet I cannot "missing codec" - does anyone have a possible solution?

You need to be more specific here. Only QT X supports MPEG-2 content natively under Lion and then, only weith specific containers/extensions. For instance, it will support MPG, MPEG, and TS extensions but will refuse to play a VOB file. And, which it will support M2V extensions, it will not automatically resource an associated AIFF elementary audio stream. In additioin, QT 7 still does not support MPEG-2 content natively and must have the QT MPEG-2 Playback Component installed to play such files. And, which QT 7 will play VOB files and M2V/AIFF elementary streams correctly with the component installed, it still does not support transport stream files. So your solution really depends on both what kind of MPEG-2 content you are trying to play and how you are trying to play it.

In fact, if your Quicktime can't open the video files, why not get a video converter for mac software to convert the video to Quicitme mov or mp4?

These are files that were stored on my previous Windows computer as AVCHD and utlised a Sony program (Picture Motion Browser - PMB) to view. The PMB had a facility that allowed me to convert the files to MPEG-2 (.mpg) which I did. I then transferred these files across to my iMac.

Are you sure the content is MPEG-2? AVCHD data can be stored in an MPG/MPEG file containers without transcoding but would not be recognized by Lion's QT X Player software. (I normally use the MKV file container for such data.) Try playing it in VLC and if it loads and plays without problem check the "Media Info" window to view the compression formats.

When I open the .mpg QT is launched but then the error regarding the missing Codec comes up.

Which version of QT? Lion can simultaneously use both QT X and QT 7 players. The one that opens automatically could be either depending on whether or not you have modified the default "Open with..." setting for the MPG/MPEG class of files.

I have the Lion OS which I am to believe updates QT to enable it open MPEG-2 files.

As previously stated, only QT X natively supports MPEG-2 compression. QT 7 MPEG-2 is not supported by Lion's QT X software and so, as previously mentioned, it still requires the $19.99 QT MPEG-2 Playback Component be installed.

I have also downloaded the QT MPEG-2 Conversion from the apple store however it will not install on my computer as it says I need an older version of my OS before it can proceed.

If by "QT MPEG-2 Conversion" you are referring to the QT MPEG-2 Playback Component, only the installer will not run. The component itself is compatible and can be installed in one of three different ways:

1) Install the component on an older system and then copy the component to your Lion system.

2) Download and use the free MPEG-2 Streamclip Beta package software to install the component. (I.e., this software package includes a "helper" utility that will install the QT MPEG-2 Playback Component which is in the installer package you purchased from Apple but which will not run on its own.)

3) You can use Pacifist to either auto-install the component from the MPEG-2 component installer package or to extract the component and manually install it yourself.