ATV installs but original apple TV format

I've tried 3 times to install ATV from an San Disk cruzer 2GB. The software loads perfectly and I get the ATV flash logo with the instructions to remove the flash drive and restart the appleTV. However, thats where the problems start because when the appleTV reboots I get the apple logo and the swirling wall of picture tiles that you get when you reboot an unhacked appleTV. This sequence usually occurs twice ie the sequence is interupted and the apple logo reverts before the appleTV starts, unfortunately with ATV flash nowhere to be seen!

Now whats odd is that when I check the software version on the AppleTV it says its running software version 1.0 and if I try and update it I get the message "there is no update available"??

You'll want to be sure you're running the latest 3.0.2 AppleTV software prior to installing aTV Flash.

I'd recommend the following.

1. Perform a Factory Restore through the Settings --> General --> Reset Settings menu.

2. Update AppleTV to 3.0.2 through Settings --> General --> Update Software menu.

3. Install aTV Flash 4.2 using a USB drive.