It only has 1gb of Memory in it and won't let me upgrade to LION.
Due to the age of that 2007 machine, I would upgrade the memory to 4GB as two 2GB modules. Technically a mid-2007 (7,1) iMac can support 6GB of memory, but Apple only acknowledges a maximum of 4GB. Snow Leopard (10.6.8) will rejoice with that extra memory. You may also have substantial file directory fragmentation that will abnormally slow down your disk access times.
You can tell what operating system is on the machine by choosing the “About this Mac” menu item under the Apple menubar logo. The version will appear directly under Mac OS X. Lion (10.7) requires 2GB of memory minimum just for the operating system install and 10.6.8 must be installed (all upgrades) already. Also, look on the back of the iMac for the model number, probably in the range A1224 - A2133.
Here is a quick fix for file system performance.
Open up your /Application/Utilities folder and double-click on Disk Utility. In the left panel will be the name of your boot drive, probably “Macintosh HD.” Click this once to select it and under the First Aid tab, you should Verify/Repair your permissions, and also Verify your disk. For the latter, if you get anything other than a green OK, your drive has some issues.
The next thing is to shut the iMac down. Turn it on and immediately press and hold the shift key until you see a grey horizontal progress bar. The iMac will eventually present you with a login window. Login. You are now in what is called Safe Boot Mode. You can now reboot normally. You may see some interactive performance improvements. Here is an Apple article on the what Safe Boot does for your computer.