recently, I downloaded Android 5.0 on my nexus 7. I hate it, and want to reset my tablet. If I do, will that take me back to the original factory setting (4.1), and if so, can I upgrade to 4.4 kit kat?
"Resetting" your tablet would only perform a factory reset, which only wipes /data. In order to downgrade, the /system directory. In order for you to downgrade Android versions, you will need to install a custom recovery and flash the stock image.
To install a custom recovery on the Nexus 7, please see the Cyanogenmod Wiki page for the Nexus 7 and follow the instructions there.
Once you have a custom recovery, you can download the 4.4.2 OTA for the Nexus 7 from your recovery.
Note: The links provided are only for the Nexus 7, WiFi edition, codename grouper. Attempting to use this method on the Nexus 7 2013, codename flo, may result in adverse effects.
No resetting will not put you back on any previous versions of Android. In order to do that you will need to flash whatever version that you want.
I suggest using Wugfresh Nexus Root Toolkit for downgrading. If you decide that you want to go back to stock, unrooted, and locked bootloader you have that option as well. This toolkit will be able to unbrick your device, if needed. It has all the necessary tools to do all the steps to flash another Android version. Plus it'll do the recovery, kernel, and bootloader as well.