Try pluging the device into some other 1080i compatible device. Is this an option?
Also, "Change the Apple TV resolution by pressing and holding the Menu and Up button for six seconds. The Apple TV will automatically cycle to the next resolution at approximately 20 second intervals. Pressing the Select button will immediately cycle to the next resolution."
No. That wasn't an option (connecting to another 1080i compatible device).
I was able to resolve my problem by connecting a micro-USB cable to my Apple TV and then plug it into a USB input on my computer. When I opened up iTunes it recognized my Apple TV and gave me the option to reset it to factory defaults. It did that and then it also updated the firmware to the current version.
Thanks for your response. It is appreciated!