Do a safe boot & repair permissions. ie: reboot whilst holding down the shift key until you see the option for safe boot & choose that option. Once totally booted, go to utilities folder & open Disk Utility & repair permissions. Then reboot normally again. Try again with the LW installer. btw a safe boot will take much longer to start up than normal.

There's 2 ways to mount a dmg file, one with disk copy & the other is with disk utility. Disk utility you find the option in File menu.

How many drives or partitions do you have on your system? It may be a permissions issue in regards to location to install.