NeddySeagoon. Thanks for your post. I have the same imac and was wondering / frustrated with the same issue of Mt Lion. Why our machine can run Lion but not Mt Lion is frustrating to say the least. I should be the one that says I need a new faster machine, not Apple. I don't support such a throw-a-way mentality.
But enough of my rant. My question to you is, are you happy with Lion on your late 2006 imac? I'm still on Snow Leopard, due to I'm nervous that Lion will slow my machine down. I had heard Lion like a lot of RAM and since our imac can only go up to 3 gigs, that made me nervious. The only reason for me to upgrade is the whole icloud thing. Right now, my imac isn't syncing with my icloud address book, ical, photos, etc.
Besided the normal web stuff, I edit photos with photoshop and videos with FCP 7.
I would probably stick with Snow Leopard if it wasn't due to all this sycing with icloud thing.
Thoughts?