MacOS – How much free disk space do I need to install Lion, and how much will I lose by upgrading

My suggestion

Don't try to resize from the Recovery partition. Boot into the normal partition and resize from there.

Background

diskutil list is misleading you. It is not the position of the recovery partition which is your problem.

I had a very similar setup, and here is the output of diskutil list for me:

  #:                       TYPE NAME                    SIZE       IDENTIFIER
   0:      GUID_partition_scheme                        *500.1 GB   disk0
   1:                        EFI                         209.7 MB   disk0s1
   2:                  Apple_HFS Macintosh HD            423.6 GB   disk0s2
   3:                 Apple_Boot Recovery HD             650.0 MB   disk0s3
   4:                  Apple_HFS Temp Partition Test ... 74.8 GB    disk0s4
   5:                 Apple_Boot Recovery HD             792.2 MB   disk0s5

Partitions 4 and 5 had a dev version of Lion on them. I have just used Disk utility to delete partitions 4 and 5 and resize partition 2 to fill the space.

This worked - Disk Utility resized the main drive with no problem. So what have I done which is different to you? Well, I resized the main partition from booting into the main partition not the Recovery Partiion. You can resize a partition that you have booted from in Disk Utility.

It makes sense that the recovery partition would "get in the way" if you have booted from it, so I suspect that above suggestion might work for you.

It's hard to know where the failure lies, but you might be able to get around the issue by re-installing Snow Leopard from media and then running the installer you have saved on the DVD/USB. This will avoid having to try the "official" Lion install and see if your installer is the cause or the mac has issues of it's own.