The reset button needs to be operated in a specific manner, download the manual to your desktop PC and work from there.
You should never try adjusting settings on your router from a wireless connection, you stand a good chance of completely locking yourself out
Once you've got the manual work through the following list of tasks, in order, and from a PC connected to the router by a cable:
- Reset to factory settings
- Disable Wireless
- Change Admin password for the router (make it complicated, so it's not easy to guess)
- Change SSID
- Change the wireless security mode to WPA2
- Set a good complicated passphrase for the wireless (something like the first two lines of a song or similar)
- Enable Wireless
- Now try connecting your laptop to it, using the new passphrase you just created
The above
shouldbe sufficient to keep your neighbour (or anybody else) out, and to get you back up and running again. If it doesn't work still then it may be that the router's dead, and you might need a new one.
If he 'accidentally' connected to your network then I'll be a monkey's uncle, he's talking rubbish - he saw it unprotected and connected to it.
Get everything shored up and you should be fine.