Locked Disk Won't Boot! Please help

I'm so fed up with this...

This is a 2010 MBP Snow Leopard.
Upgraded to (not a clean install) Mountain Lion without doing software updates beforehand, think it got corrupted Install was longer than usual, 50 minutes.

At first turned on and worked, but then it wouldn't boot at all, show a stop / prohibitory sign.
It said drive was LOCKED when trying to reinstall ML (using bootable USB flash drive)

I tried:

Reformatting to journaled, FAT32, NTFS (on XP laptop), journaled again (as an external drive).

Swapping this drive on another macbook. I was able to fresh install ML with no problems! But when putting back in original macbook, still same stop sign problem.

Ran Disk Warrior repair permissions. Same plus unlock with BatChmod.
Apparently they worked, because on disk utility says "Owner's Enabled: Yes", before was "No"

Yes I tried Get Info - ignore permission, enable all options to read/write, leave the lock option unchecked.

I also did a verify and repair permissions, and verify and repair disk itself - came up OK (on disk utility) - drive doesn't seem to be dead!

With Snow Leopard DVD, it reads "Mac OS X Base System" as only 1.26GB drive !!! ???

Now with bootable flash drive, disk utility doesn't read the hard drive at all.

Pressing Option at startup sometimes reads all 3: drive, recovery, and bootable USB.. but now it only reads the bootable one.

Someone help please. Thanks!