installation os x on Mac pro 2 from scratch
To make a USB installer from the 10.7 .DMG you need to open the .DMG, then open the installer application by right-clicking and selecting Show Package Contents and then find the actual installer itself, InstallESD.DMG.

Use the Restore function in Disk Utility to copy InstallESD.DMG to your USB device (if you receive any errors, try mounting InstallESD.DMG first before copying it). You should then be able to boot your Pro from it :)