Q: How do I reset a old 2007 Macbook to factory settings

Use these Apple guidelines:

https://support.apple.com/en-us/HT201065

Did you get the original installation disks?  You should have.  By erasing the HDD and reinstalling the OSX will allow you to install your own password and connect the Macbook to your Apple ID.

Ciao.

Ask the person who gave you the Macbbok for the disks.  If they are not available, you have two options:

Contact Apple customer service and request duplicate installation disks (there is a fee).

Purchase the Snow Leopard retail disk (it does not have the Apple applications on it).

http://www.apple.com/shop/product/MC573Z/A/mac-os-x-106-snow-leopard

Ciao.

No.  You have to erase the HDD and reinstall the operating system.  A safe boot has nothing to do with that.

You will need install disks.

Ciao.