It appears to be running Lion, but I'm not positive. It's the owner of my company's personal machine so this is the first I'm seeing it. Internet recovery did indeed fail, I got it connected to wifi and after a few seconds got that error. I threw a mac formatted flash drive (after I found one that was high enough capacity that didn't have important stuff on it) in for grins and it worked to boot to recovery, and does not show the drive. I ordered a replacement drive and now of course I'm having trouble removing the screws.