This MacBook (black 2 GHZ Intel Core Duo) would not accept the firmware password I just set via the Firmware Password Utility from the Recovery Partition in OS X Lion 10.7.2.

The following steps let me turn off the firmware password protection. It only works if you haven't forgotten the password you had set. I my case this means I had used the correct password but it wasn't accepted. Seems like a bug, maybe specific to my particular (and rather old) hardware.

1. Open Terminal and type diskutil list
2. Mount the Apple_Boot Recovery HD partition with diskutil mount disk0s3 (use the identifier you see listed)
3. In Terminal type: open /Volumes/Recovery\ HD/com.apple.recovery.boot/BaseSystem.dmg
4. In Terminal type: open /Volumes/Mac\ OS\ X\ Base\ System/Applications/Utilities/Firmware\ Password\ Utility.app
5. Now you can turn off firmware password - again, provided you know the password you had set

Update No. 2: Apple provides a Firmware Restoration CD in case something goes wrong during the update. Sorry I found this only now...

>>>

Update: Had nothing to do with the CD falling on the keyboard, that was a coincidence! It was a buggy update app - Zera run it again the next day and it froze a second time exact same..! Off to Zurich the computer went again.

>>>

Poor Zera! While the Firmware update (available through Software Update) on her MacBook Pro was running, she opened a letter and a CD fell out onto the keyboard, hitting the Enter key. This killed her Mac completely - nothing but a black screen after that (and off to Zurich for emergency repairs...)! Is that bad luck or what?!!

Firmware updates are always a tricky issue and you MUST take your time and utmost care while running them.