Hello Allen!
Thanks for the quick reply. I tried all night doing all the different solutions in random order and I managed to reinstall Lion using internet recovery, this was vaguely my workflow (starting from my stuck installation):
1) shutdown mac by holding power during stuck installation
2) refresh NVRAM
3) get stuck in Sierra installation afterwards again
4) force restart, hold D to enter Hardware Test, run test
5) test gets stuck at 29 seconds, cursor doesn't respond as well
6) force restart, can't boot anything with a bunch of unix code telling me to press any key to restart again (this keeps repeating)
7) force restart, refresh NVRAM again, right after second chime, enter Internet Recovery mode
8) reinstall OS X Lion (this time it somehow works!)
So after getting my mac in working condition again, I didn't learn my lesson and tried to update to Sierra again.
1) about halfway through the installation stuck, says that it was a Hardware issue and asked me to do a Hardware Test
2) the hardware test stuck again like (6)
3) bought a USB stick to create bootable installer
4) I looked up at how to use a bootable installer and tried it without the USB stick (turn on holding Option)
5) decided to booted the mac in the OS X installer drive (there was only that one option) again because why not
6) installation started, went pass the point where it told me it was a hardware issue (1) yesterday, and went on without a hitch
7) now suddenly I have a working macbook air on Sierra
I am not too sure what happened, but the only possible variables were these :
1) the mac might have been too hot through all those installation attempts during the past few days (the fan was loud too), shutting it off and moving to an air conditioned office
2) the use of Startup Manager to boot into the OS X installer drive, previously I have only used my Macintosh HD in any of these kinds of selections, but in the Startup Manager it doesn't even show up. Now that it has finished installing and everything works fine, the Startup Manager only shows my Macintosh HD, no more OS X installer
Anyway, thanks Allen! Hopefully someone figures out what exactly I did wrong (or right at the end).
Cheers,
Aaron