How to restore from an image disk?

My MAC was working fine and at that point from Disk Utility, selecting the main disk, clicked on "New Image" and saved the entire disk as a backup. It resulted in a 135Gb dmg file. I uploaded on USB hard disk together with other files and backups.

After some time I screwed up the system with some application and had problems at boot up.

I considered that I have no problem since I have the dmg backup. So I booted up from the original SL disk and selected from Utilities menu, "Restore System from backup" but the USB (where the image is saved) is inserted but it can not find it. (?!)

Then I went back to Utilities/Disk Utility and noticed that my USB drive it does shows up. I clicked on the main disk (damaged boot), selected the "Restore" tab, then selected the dmg image from the disk, selected where to restore and and Go... but I get "Restore Failure, Could not find any scan information. The source image needs to be imagescanned before it can be restored" ...and I am stuck! What this message means and how I can get around it to have a successful restore?
Do I have to erase the partition of the original disk before?
Thank you.

How did you 'upload' it ~ drag and drop may well have been the problem as it is a pretty large file. If you have an external or a spare internal hard disk, clone your operating system using Carbon Copy Cloner or SuperDuper.

Assuming you have an Intel machine, your post does not provide this important information, an external USB drive will be bootable from the cloned copy.

sorry for my lack of info. Yes it is an Intel machine with SL OsX loaded on and currently I am not able to boot from it anymore.

I have a USB hard disk that I use it just to dump on it files from multiple computers. This is not bootable, just a storage device. On this portable hard drive I have saved the dmg file resulted from making the boot disk image with Disk Utility.

At boot up with the original SL disk I have no option to drag anything. I just click on the source and select the dmg source from the portable disk and then I select target the Mac's main boot up disk.
When I start the process I get: "Restore Failure, Could not find any scan information. The source image needs to be imagescanned before it can be restored"

Have a read through this thread:

Apple - Support - Discussions - Disk Utility issue since snow Leopard ...