Thank you for your help, woodmeister50. I followed the same process except for these two:
- When finished, go to Finder and navigate within the newly created USB drive to System > Installation > and delete the file (alias) located here named “Packages” – keep this window open
- Go back to the ‘OS X Install ESD’ mounted drive, and drag & drop the “Packages” folder into the /System/Installation/ directory you just deleted the Packages alias from, let this large folder copy
since it was a DVD... possibly this was the reason it didn't boot up.
As for Target Disk mode... will read up on that, never tried it before, although from what I'm seeing, it involves pressing "T" on the keyboard - and my mini doesn't respond to it.
Also, I did check the drive by removing it from the mini and attaching to the USB box... seems to be ok. I also tried another drive that was originally there, also in perfectly working condition (I upgraded this mini to SSD about 6 months ago, and everything was working great on ML).
Another idea I had is to use bootable SD card, since it doesn't seem to rely on the now-disfunctional USB interface. Although I might be wrong.
Btw, is there any way to force-eject the DVD without a keyboard/mouse?