Apple TV Won't Restore

I purchase an AppleTV 2 from a friend a few months back so I could eventually use AirPlay with ML came out. He spent $30 to jailbreak it and it doesn't really do anything that I want (the movies on XMBC or whatever you call it load, but buffer too much to actually watch movies on it. If you have any ideas to fix that, I would appreciate that as well) so I decieded to try to restore it as it wouldn't let me use AirPlay without the update. I went to update it and it says that there is no update available. I then went to restore it and it resets the AppleTV but it comes back and nothing is changed. Does anyone have any idea what I should do? Thanks guys.

Every time I press restore it says, "Restoring to factory condition failed. Your Apple TV could not be restored to original factory condition. Try again or go to www.apple.com/support for help."

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