Lion is 64-bit only. Although the early minis have socketed CPUs, so you could theoretically replace it with a Core 2: http://www.xlr8yourmac.com/systems/mac_mini_core_2_duo_swaps...

According to Apple, your Mini isn't supported under Lion: "Your Mac must have an Intel Core 2 Duo, Core i3, Core i5, Core i7, or Xeon processor to run Lion."

I have a Core Duo-powered Mini and am in the same boat. That said, my Mini is at least five years old, and I don't think it's at all unreasonable for Apple to focus their limited resources on more modern machines. Besides, my Mini is running Tiger in a data center, so I'm not losing any sleep over not being to run full-screen apps on it. ;)

Yes, it is 64 bit only - Core 2 Duo or newer required.