First of all, you should describe a little more about your a330 since there are more than one model from different manufacturers, and most of the answers are different. If you have a Gemei A330 you can browse the subforum for it: http://boards.dingoonity.org/gemei-a330/
Anyway, I'll try to answer your questions, but I've never owned any A330 so don't do things just because I said that:
1. Both the sd card and Dingoo unit have information on them, mostly what looks to be from the previous user (e.g the Dingoo has PSX emulators on there and other random stuff, the SD card has tons of roms). Is there a way to just go for a full factory reset on both items? I saw a thread on this on another section but it didn't really clear up anything for me. What can i delete? What do i have to keep?
I'm pretty sure you can extract the SD Card and erase all content in any PC, or maybe connecting the device to the PC shows the SD Card as a disk unit. For a factory reset of the internal memory I have no idea, sorry.
2. Can the system play Windows PC games?
No, maybe some DOS games if DOSBox is available for it.
3. What is the best OS to use on there? I find the current OS easy but are the others more benificial? There's a few threads discussing this but a definitive answer, from a purely gaming standpoint, would be great.
I don't know what different OS you can get, but be aware that there's no "definitive answer, from a purely gaming standpoint". What's better for some people might be worse for others, always, and that also applies to you. If there's a way to try the different OS's (on the A320 you can have both OS's installed at the same time and both are fully functional) you should do that, that's how you'll know what's better for you.
4. As i don't know how old the software is on the system, are there any urgent updates that i need to perform?
As I said before, it all depends on what "a330" you have, but don't expect a lot of software updates if you stick to the native OS. And even if you chose a more open OS, there's not much movement currently, the Dingoo devices are pretty old.