I should have mentioned..
The VGA to USB adapter most likely uses drivers that are no longer supported in Lion.
You will need to check with the manufacturer of that adapter to see if they can help.
The easiest and futureproof way forward is the one i mentioned above.
Obviously if that works for your setup.
I do have one more question though and I know this is not as fool-proof as the Mini Displayport solution but would it make a difference to go from DVI to USB in terms of drivers supported in Lion?
I do believe I have a DVI to VGA to USB adapter somewhere around the office and could try and dig it up. Unless you think it's a waste of time....
Again, this is only something that the manufacturer of the adapter can say.
Using DVI instead of VGA is alway better but I do not know much about those adapters.
BTW not sure about your setup but if you are using this adapter for docking station - you should focus on the drivers for the dock. Just a guess.