We use SCCM extensively at my office, and yes, it's entirely possible to tell it to reimage every single computer. You just need to target the deployment at "All Systems" and make it mandatory. My guess is that some admin picked the wrong collection, which is fairly easy to do in SCCM 2007 (2012 has Collection folders, which helps with that), and there's no warning messages -- just a summary of "this deployment is going to these devices, click Finish to do it." Of course, most other mass management tools assume that the admins know what they're doing, so they don't have much in the way of guard rails either.
One of the more obnoxious elements of SCCM is that there's no real way to recall a command you send out; clients pick up policy at periodic intervals, and without manual intervention, they'll just grab the policy and do what it says even if you kill the server in question. You can block deployments by taking down distribution points (if the clients can't grab content, they won't run the deployment), but you still have to be fairly quick about it to stop it.
What we do to prevent these sorts of disasters is implement process around the use of the ConfigMgr console and ensure only the people who know how to use it actually use it. To prevent an OS reimaging incident, our OS deployments go through a static set of collections by process and are always optional (requiring a manual touch, either at PXE boot or in the UI) except for a specific set of collections that are segregated in their own folder and have names and descriptions with scary words that make it clear what's going to happen. For instance, in our "Clean Reimage" folder, we have a collection that says, "Windows 7 Reimage (Clean, PXE, Forced)" with a description to the effect of, "*** A computer placed in this collection will be REIMAGED and LOSE ALL LOCAL DATA. Local state is NOT preserved or transferred. ***" If we were a larger IT organization, we'd probably use SCCM's role-based security to limit access to clean reimages to a specific group of people.