Have the same issue like here https://discussions.apple.com/thread/3653570 :
I have an Apple TV 1st generation that I tried to do a factory restore on. I did not unplug during the progress bar. It then started up with the apple, then the opening video with all the tv screens. It asked me for the language, I selected English, then had me choose the correct internet connection so I typed in the password for our Wi-Fi, then it came up with the code to connect to our home computer and started flashing a new code every 2 seconds. I unplugged the Apple TV and waited about a minute then plugged back in. It again had the normal start up, but then after the opening video it began flashing between a screen with the apple then a blank black screen then to a menu screen and cycling through each screen about every 1-2 seconds. I unplugged again and waited about 10 minutes but then had the same results. Is there anyway I can do another system restore as I cant get it to stop flashing. But the solution doesn't work.