How do I restore Mac Mini late 2009 to factory settings. Error occurs.

I have a late 2009 Mac Mini with 2.26 ghz core and 2 GB memory running Lion 10.7.4. I wish to restore my computer to factory settings but when I put in my Snow Leopard disc I continue to get an error message that reads "You can't use this version of the application Install Mac OS X with this version of Mac OS X. You have Install Mac OS X 23.1.1."
I wish to restore my Mac to Snow Leopard and then redownload Lion from the App Store and start fresh with 10.7.4 on my restored Mac but I am finding it incredibly difficult.

You might have to erase the Drive first, but did you try reinstalling Lion from the Restore Partition?
Hold CMD+r keys at bootup?
Otherwise...
  1. Insert the Mac OS X Install disc, then restart the computer while holding the C key.
   2. When your computer finishes starting up from the disc, choose Disk Utility from the Installer menu at the top of the screen. (In Mac OS X 10.4 or later, you must select your language first.)
      *Important: Do not click Continue in the first screen of the Installer. If you do, you must restart from the disc again to access Disk Utility.*
   3. Click the Erase tab.

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