If you know someone with a working Mac, or have access to one, you can install to a USB drive or even just a flash drive, boot your Mac using the USB drive, then apply the firmware.
not following. i restored the dmg of the firmware update to a flash drive and the mac wouldnt boot to it
If this is the iMac mid 2011 model, it shipped with 10.6.6 (10J4026). So a 10.7 dmg should work. Out of curiosity, how did you get this Mac?
open box return
Was the hard drive replaced, or just reformatted?
formatted to delete previous owners data
Regardless, I would repartition it, using GUID partition table, and boot from a 10.7 dmg. Or install 10.7 to a thumb drive or usb drive from another Mac, then update the firmware, then use internet recovery. This really depends on whether or not you can boot from an external drive. Although if you can boot from an external drive, that implies something is wrong with the installed drive.
Where did you get kernel panics at?
only during install, not target disk mode If you are getting KP's after you installed and during the first boot up only using your iMac, maybe there is something wrong with the disc image you used to install.
its very possible, but by this point i have used a number of different imagesThat seems less likely, as long as its 10.6.7 or later. What is important is that you find out exactly which Mac you have, and what OS it shipped with. You can look it up on
http://www.everymac.com/.
Apple iMac "Core i5" 2.7 27-Inch (Mid-2011) Specs
Identifiers: Mid-2011 - MC813LL/A
Apple uses machine specific builds for new hardware, so a 10.6.6 dmg is not the same as the version that shipped with new hardware. 10.6.6 could have came out the same time as 10.7, so you might need a later version of 10.7.x to install on your hardware. This should work with a ML dmg, so make sure your drive is partitioned properly and post exactly when you are seeing the KPs.