"Is it possible to run a DualBoot system with two or more Mac OS's and if so, what is the best way to go about it?"
Sure. I regularly boot to Mountain Lion, El Capitan, Sierra, and High Sierra from the same Mac.
You would have to partition the internal drive.
Generally, the best way to do this is:
1. Use CarbonCopyCloner to create a bootable clone of the internal drive to an EXTERNAL drive.
2. Boot from the cloned external backup
3. Re-intialize and partition the internal drive.
4. Restore from the cloned backup
5. Install second OS on -other- partition.
Some further suggestions in your particular case.
I would "leave Lion behind".
OS 10.8.5 "Mountain Lion" is much better, and I suggest you make that your "base system".
You should be aware that Apple's newer versions of the OS (starting around 10.9) seem to be designed to run best on Macs that have either a fusion drive or SSD installed.
I'm not saying that Sierra won't -run- on your iMac, but since it has only a platter-based hard drive, the user experience may leave you with the impression that the computer is "walking", rather than "running". That is to say, it's probably gonna be.... S...L...O...W.
A better way would be to get an external SSD and set that up as your Sierra boot drive. Unfortunately, a 2011 iMac doesn't have USB3, the only way to get the speeds that an SSD is capable of delivering is via thunderbolt, and those drives are more expensive.
But it would work.
You DON'T need a "large" SSD to be the boot drive -- 256gb is "enough". You can leave "large libraries" behind on the internal drive, and they'll continue to work fine.
If that's beyond your budget, you can still try Sierra on the internal drive.
I suggest that to install it, you get a USB flash drive at least 16gb in size, and use either DiskMaker X or Install Disk Creator to create a bootable copy of the installer on it (and then install from the USB drive). Seems to go smoother that way.
