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You'll need another disc. The dmg can be used for upgrades only. You cannot boot from it.
But with Mountain Lion, it doesn't seem to work.
You can create a bootable flash drive using the InstallESD.dmg and Disk Utility, even on Mountain Lion. Many articles cover the steps: https://encrypted.google.com/search?num … ntain+lion
Why when i boot and press options the only drive displayed is the recovery partition?
As i can see that the macintosh hd should also appear!
Issue resolved. For future reference:
I inserted a usb flash and booted into recovery mode,formatted the usb using disk utility.
I restored the image file from the dvd i already have to the usb. I had an error message when done rewtoring but i restarted and went with the installation process. All went fine, i have now the mountain lion installed