Buying a used Mac from any source is best left for experienced Mac users, for the very reasons you described.
At best you purchased an expensive education, at worst, stolen goods.
All said and done its now asking me to input my Apple ID and then it says my ID has not purchased the operating system.
A 2008 Mac would not have had OS X 10.7.4 "Lion" already installed, and it is impossible for you to install it from the Recovery partition since the license to use Lion is not transferable by any means. The seller (more than likely, the thief who stole it) erred in not restoring the Mac to its original condition before selling it to the pawn shop. Without that MacBook's original System Install DVD - which the pawn shop didn't supply, right? - it will not be useful to you.
There are no "hard copies" of Lion available. Lion exists only as a download from Apple, whose servers check your MacBook for a legitimate purchase of it.
Your best alternative is to phone Apple at the number shown on the Apple Online Store website. Explain that you purchased a used Mac and require a replacement System Install DVD. Use those exact words. Have the MacBook's serial number ready for them - it will be required.
Determine the Mac's serial number using the following: http://support.apple.com/kb/HT1366
Apple will collect a nominal fee, $25 or so. Once you get the disc, boot from it by starting the Mac by holding the c key with the disc inserted, and pray the original owner did not configure a Firmware Password.
Reinstall its original operating system from that disc, after which you will have reached Step 1 toward using your Mac.
After installing it, you will need to purchase Snow Leopard from the Apple Online Store, unless its original OS was already Snow Leopard (yours was probably OS X 10.5.2 "Leopard"). Snow Leopard costs $20.
Only after installing Snow Leopard can you purchase Lion from the App Store. You will need to call the Apple Online Store again and purchase a download code since Lion no longer appears in the App Store. That will be another $20. You will "redeem" this code in the App Store.
Your MacBook is too old for Mountain Lion.
Total cost: $65 + tax + whatever you already spent.
Tell your GF she was right. Do that now, to prevent further compounding your misery