I do not recommend completely erasing the disk. She really needs her original System Install DVD to install the original operating system. You may not be able to use OS X Recovery on her iMac.
First, have her "Deauthorize" her iTunes account. Same for Audible if she had one. Remove any Firmware password if she created one.
- Start your Mac using ⌘ R to boot OS X Recovery
- Select Install Mac OS X from the Utilities menu.
- Follow the prompts for configuring a new user account.
- Check the box to allow the user to administer the computer.
- Restart the Mac
- Using System Preferences > Users & Groups, delete any old user accounts.