"Waiting for Apple TV..." - trying to restore

Had my ATV2 for a couple of years, never had a problem with it.
Either out of the blue or because a friend was pressing buttons randomly (although don't know how), the ATV started flashing quickly.
Grey blank screen, doesn't respond at all.
So I bought a Micro USB cable to restore the software.
Plugged the ATV into my MacBook Pro (only Micro USB connected, not power or HDMI) - running latest OSX 10.8.4 and latest iTunes 11.0.5.
iTunes recognised the ATV and showed the "Restore Apple TV..." button
Downloaded the latest ATV restore update.
Then I get the following messages in iTunes:
"Extracting Software"
"Verifying update with Apple"
"Preparing Apple TV for restore..."
"Waiting for Apple TV..."
And that's where it hangs.  I've tried multiple times and left it for hours and hours.
Just says "Waiting for Apple TV..." and won't progress further.
I've tried plugging the power cable in, I've tried pressing Menu & down, and Menu & Play/Pause for 7 seconds.  This often brings up an error 9 or error 1600 but nothing gets past "Waiting for Apple TV".
Unless anyone has any ideas, I'm seeing a call to Apple Service or a new Apple TV.

Just the future shop a couple towns over. It was a gift from my brother so I don't have the receipt. I just scheduled a call from apple care tho...Maybe they can ship me a new one or something.

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