Well, you know the story, he can't remember where he put it, yada,
yada, yada...

Clipboard with wildly inflated retail price. Sign here, due in 30 days.

So my question is, what would be a half-way decent (non-dangerous,
don't want to get sued if the tool breaks) set of 'loaner' tools? Or
should I be a pri$k, and not loan out tools period?

If you're lending it they're on their own. You've no liability. But add a
disclaimer to the clipboard mentioned above.

I will get a cheap tool chest to put them in, keep that ONE unlocked,
and pretty much let the neighbors help themselves when they ask to
borrow a tool...

Best to leave them as cheap as possible. Encourage them to get their own
when they end up breaking yours and paying an arm and a leg to replace it.

I'm all for being neighborly. I've loaned a few of my more unusual tools
out, pick axe, soil tamper, sawzall, etc. The sort of thing that's not
expected to be in a 'normal' set of tools. But when it comes to regular
tools like pliers, cutters, wrenches or a 3/8" drive socket set I never,
ever loan them out. I have no desire to go hunting them down to return it
when I need it. Nor do I have any interest in discovering what half-ass
thing they've done with the tool and ruined it in the process. To say
nothing of not even cleaning it before returning it.

Keep a MAC or Snap-On catalog handy. Let 'em see what a set of 'em lists
retail. That's a subtle, but direct, hint that they're not getting loaned
out. It always helps to know if the local Sears is having a sale on
craftsman sets. Point them in that direction.