Can Address Book still store local groups or contacts with iCloud enabled?
Here's a Mountain Lion solution that I hope works on Lion. (I just worked at this from the other way - wanting to banish forever the On My Mac group.)


Open Contacts
Select On My Mac as the default account.
Import a contact or two from a vCard or import your test data set from the Import… menu
Switch back your default account to iCloud.


Going forward you can always drag a .vcf / vCard file into the On My Mac list to import there directly without changing the default account.