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I would have no doubts that your great-grandfather was named for General Nathaniel LYON, the famous Union Civil War hero. However, your great-grandfather could not have been the General's descendant because the General died unmarried. Gen. Nathaniel LYON not only died in battle (1861), he left his sizable estate ($30,000) to the Federal Government for the continued prosecution of the war.
It was not uncommon for people to name their children for military or political heroes, whether related to them or not. Gen. Nathaniel was of the Roxbury LYONs, descended from William LYON, so you might want to concentrate on that branch in your search for ancestors. According to Vol. I of the "Lyon Memorial," the General's line is: William > John > William > Moses > Ephraim > Amasa, though there may be some controversy as to his descent.
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