ok, i managed to magically fix it myself by pure chance.
I've attempted the restore on a MacPro machine at my office, this is a macpro that was never used with iTunes as we use it for other work with Final Cut pro and After Effects,etc.
it magically worked, so now my Apple TV gen2 is working with the latest software.
someone mentioned that updates are unstable when performed on macbookpros because of low power off USBs, I'm not sure, my Apple TV failed during update directly via inbuilt software update.
The scariest of things is that when I took the apple tv to an apple store they attempted the restore and failed, sentencing that my apple tv was dead and faulty and needed repair, and tried to charge me for it!
This clearly reveals how bad instore service is. So, keep searching the internet people, the "official" update or the "official" way, is clearly the least reliable!
anyway, lesson learnt: NEVER EVER UPDATE APPLE SOFTWARE BEFORE CHECKING FIRST ON THE FORUMS ABOUT THE DAMAGE IT MAKES. APPLE SOFTWARE UPDATES ARE FULL OF BUGS. REMEMBER, IT'S FREE FOR APPLE TO TEST THEIR DODGY SOFTWARE UPDATE ON US AND RELEASE THE SOFTWARE RIGHT AWAY, INSTEAD OF WORKING ON IT MORE BEFORE RELEASE TO THE GENERAL PUBLIC.
good luck!