I am facing the exactly same issue with an added twist. I just purchased ATV 1 month ago but started getting weird ATV issues 2 weeks ago. The first time, I unplugged the unit for 30 minutes and it was okay. But now that does not help. I have since then been trying everything (factory reset, changing batteries, pairing a new remote, turning off other devices near by, relocating the unit, etc).
After I keep pressing the button for Up or Down it might eventually respond. But the cursor flies to the extreme in that direction. So I think that is because I pushed it too many times, but that is not the case. So I press it once and it moves one space and then to the extreme. This obviously makes it difficult to do anything. The 'beep' of selection also keeps going off so it is almost like a button is stuck. This might be why the unit is generally behaving sluggishly as well.
I sometimes can eventually get it to select something... After I did a factory reset and SW update I had to reconfigure WIFI and ITUNES which was next to impossible with a malfunctioning remote.
I did try other things and these lead me to think that maybe the issue is not in the remote but possibly in the ATV unit. It is almost like there is some sort of interference (another IR signal, or stray electromagnetic signals from another device near by). But, I have not added any devices since I bought the ATV!
1. Another electronics item I own (satellite dish receiver) started having a misbehaving remote as well. I changed the batteries but no matter which button I press, the unit thinks I am pressing the number 6. So, it is like a button being continuously pressed again.
2. I was able to pair a new device remote eventually. But, the issues I face with that are the same.
3. To rule out EM interference I made a very poor metal shield with aluminum foil around the ATV unit and some of the cords. The remote started working 'better' but still not completely back to normal.
4. I disconnected the ethernet cable and tried using WIFI to see if that cable was picking up the interference. No difference noticed.
To rule out EM, I might try shielding the HDMI and power cables now but this is getting ridiculous. ATV should not be so sensitive to other devices if it has been tested to the correct IEC regulations which allow it to have a CE marking.
Any ideas?