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