No permissions, locked out and want to start a new install

I have a mini that had the latest Lion Server installed and was being configured,
I know very little about servers and it would appear my friends who were helping set things up know even less. As I have now found out tomy cost.
This was a refurbished MMserver direct from Apple - preinstalled with Lion Server. After it was almost configured with admin, users, filesharing, mail, ical etc and ssl authentication, a bunch of new users, groups etc suddenly appeared in the admin interface. All these were deleted to leave only the ones that had been set up.
Now the users we set up along with admin can log and use the machine as a user but cannot do anything that will affect the systemas they do not have permissions. Even the names with server permissions have been restricted access
When logging into the server app I get the following message.
Msg: This server is not supported. Server supports servers running Mac OS X 10.7.
If I go into Apple Software Update it wants an administrator's name and password...the one used to log into the system in the first place no longer works.
Given there is no data / files of importance on this machine, I thought I would use Disk Utility to start again but hit the same issue of not having permissions. I have tried all the names and passwords I know and which were used and non have worked.
If I then use cmd+r on boot up nothing happens it just continues to boot to the log in screen,
I looked in server admin and nothing is registered and when i add the server name..it just searches but does not do anything.
How can I get this back to to the start - a virgin system....so I can start setting it up?

Are you using a wireless keyboard?  If so, try a wired keyboard to initiate Recovery mode.
Also, confirm that you have a local recovery partition by starting in Single User mode (Apple - S on startup).  At the command prompt type
diskutil list
And finally, you mentioned this is a refurbed mini.  What model is it?  Is it one that supported internet restore?

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