That was fun
I backed my Mac Air up to Time Machine first. Good thing I did. Then I started the download/install, and went out for a bit. When I came back it had booted into the recovery drive; never a good sign. So I rebooted, and saw a struck-circle icon for about five seconds, then it rebooted back into the recovery drive.
So I had it restore from TM, which it spent the next hour or so doing, to a successful restore. When I restarted, I saw a struck-circle icon for about five seconds, thena struck-circle icon for about five seconds, then it rebooted back into the recovery drive. rebooted back into the recovery drive.
Hmmmm.
So I had the Recovery Assistant + Disk Assistant to try to refomat the partition. But it failed because it couldn't dismount the disk; it was running from that drive, which is where the recovery assistant lives, on its own little secret partition. And it couldn't erase it, either.
After several different types of resets, and general screwing around including Erase, Partition, etc, etc, every restart still showed a struck-circle icon for about five seconds, then rebooted back into the recovery drive.
So I messed around with the ML installer downloaded from the App store, used it to create an installer DVD, booted from it, and installed a fresh version of ML. Skipping the Time Machine step of installing apps or users, I tried to reboot from it, and saw a struck-circle icon for about five seconds, then it rebooted back into the recovery drive.
So I called AppleCare. Over the next several hours, various levels of tech support folks convinced themselves (on multiple callbacks - I was rarely on hold) that all the stuff I had already tried would't work, so the guy finally gave me a recovery assistant key combination that ensured that I would get a specific firmware upgrade when I installed over the internet.
Bingo. Up and running, finally.
Weird flaw that probably didn't happen to anyone else, but great tech support.