"This CPU is not compatible with 64-bit mode." - Installing Windows 7 Ultimate 64-bit on a netbook with a 64-bit Intel Atom CPU

Check your bios settings. Some of the processor features may be disabled there.

In particular look for one called 'No Execute' (Sometimes shortened to NX) which should be enabled.

The fact that CPU-Z does not show EM64T is significant. Since item says it does support it, it seems logical to conclude that the bios is not enabling that feature. Given that the machine only supports 2GB of memory, Lenovo might not have deemed it necessary to upgrade the bios to enable this feature.

To be sure your CPU is 64 bits, boot a Linux liveCD (knoppix, ubuntu install, whatever), open a shell and type :

grep flags /proc/cpuinfo

If you see the lm flag (long mode), your CPU is 64bits (amd64).

As I suspect your CPU is 64 bits (all CPU are these days), you could also try to boot a Linux 64bits liveCD to see if it works.

While you have 2gb of ram, some of it has been allocated to graphics - as such the installer will see less than 2gb of ram. This means that your laptop doesn't meet the minimum system requirements for Windows 7 64 bits (though just barely). It's a really weird error message if it's that specific problem (and I'm guessing here), but it's plausible.