What, exactly, does a factory reset do?

My Thinkpad T430, less than a year old, is having issues - corrupted .dll files, Windows Update not working, all sorts of fun stuff. I am waiting on someone to e-mail me clean copies of the .dlls I need BUT am concerned that that won't fix everything, especially the problems with Windows Update. I've exhausted pretty much every other option I can find to try to repair this at this point. The nuclear option is a reset to Lenovo factory settings from the Windows repair environment accessed by pressing F8 during boot, but before I do that I want to understand *exactly* what I would be doing to my computer.
Specifically: will a factory reset return all Windows system files to their original state, meaning there is no chance that the issues I'm having will persist? Will it guarantee that Windows Update will work again and that all of my .dll and other system files will be in a fresh, non-corrupted state? Does the process replace current system files with original versions that were installed on the computer?
I just don't want to restore to factory settings and find that Windows Update still won't work and now I have to install over a year's worth of updates manually from the Microsoft website, one by one, or go through the trouble of having to reinstall all of my programs, get my files back on the computer, fix settings to be as I want them again, etc. only to not have these issues fixed.
Thanks for any help/input.
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OK,
IMHO the simplest way to perform the factory recovery is to prepare factory recovery media (cd+ 3dvd, or usb flash drive, 16 gb in size) using Factory Recovery Disks applet within Control Panel.
After that recovery process all information on laptop will be deleted (OS, applications, user data) and the state of the OS and applications will be as from the factory. So before that process perform your data backup. Of course after laptop recovery you should to upgrade the OS, drivers, applications from Lenovo, install your applications again.
Or you can repair and replace files (.dll as you mentioned) yourself from the recovery environment by pressing ThinkVantage button while laptop boots up. But it's useful way if you have full system backup.
I''d advice to make full system backup after factory recovery, with upgraded drivers, applications.
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How does a factory reset work?

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If there are better options what are they?
Thank you for your time
Donald
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View Solution.

Factory Reset formats the hdd and does a complete reinstall of everything. Many times this corrects a flaky install from the factory. If you still have problems after doing the Factory Reset, check your drivers page for an update which might help>>HERE
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