hi - For anyone searching for an answer to this question - I just had the same problem and called apple support as instructed. They are arranging for the Apple TV to be collected and returned for repair.
I asked if there was any way to restore myself and was told no. I said that I was concerned that if, for whatever reason, I needed to restore the Apple TV after it was out of warranty that it would cost me - they said that if it was due to a software update problem then there would be no charge - even out of warranty.
I'm amazed that there is no way an owner can restore the box to factory settings - this seems like a really bad idea.