Apple TV Gen 1 - Keeps Restarting and Factor Restore Fails

I have a 2 year old Apple TV Generation 1 box. Suddenly yesterday it seized up while renting a movie. I unplugged the box and plugged in back in, but restarted from scratch asking me what language to use. I clicked through the normal setup options and it asked me if I wanted to;

1. Restart
2. Factory Restore
3. Run Diagnostic

I tried restarting first, and it came back to the language question again. I tried running the diagnostic and it said there is an issue with my network settings. I tried factory restore and it came up with an error message saying it could not be completed.

I'm think I need to send it to an authorised Apple service centre. Anyone else have any ideas?

Thanks!