OK - try the following:
1. With your Motorola Droid still powered "Off," slide open the keyboard
2. Press and hold the "X" button on the keyboard while pressing the "Power/Unlock" button, located next to the 3.5mm headphone jack. Continue holding down the buttons until a yellow triangle "Warning Sign" appears on the screen.
3. Once the yellow warning sign appears, press the physical "Volume UP" and "Camera" buttons simultaneously until a new menu appears. This may take several attempts before success.
4. From the new menu that appears on-screen, go down to the "wipe data/factory reset" option using the Directional-Pad next to the keyboard, and press the "Center" button on the D-Pad to confirm.
5. Scroll down to the "Yes -- delete all user data" and press the "Center" button on the D-Pad once more. That's it! When your Motorola Droid is done wiping all saved applications, information, and settings, your device will be back to the factory settings.