Okay got it running. here is what I had to do.
1) make sure you have the latest version of ITUNES already installed and running. You can not do a restore without ITUNES working and connected to the internet.
2) make sure you are using a known good cable. In fact cut up all other cables that did not work, and use the cable that works only. make sure you never get confused about the cable as several are manufactured that will not work.
3) Download the latest version of season pass. it is free and you need the latest version. Also I hope you backed up your BLOB files off the ATV2, as this is a buried option within previous versions of ATVFLASH. you need those files to be automatically retrievable during the restore process. complicated, but it all works this way. (If you have only backed up the latest BLOB for the 5.X firmware, you might not be able to restore at all, as that was not jailbroken yet - lucky for me I had a few of the older versions BLOB files backed up specific for my ATV)
4) download the latest version of ATVFLASH. you bought it. you own it, and you need the latest download version. It is linked to the latest version of SEASONPASS so I wonder why not have SEASONPASS built into ATVFLASH so you only need one file, and it is all automated. not happening. you need two files.
5) Run seasonpass. reinstall and re jailbreak your apple TV. should work
6) disconnect seasonpass, and activate your apple tv on your TV and network. should see a little FIRECORE icon in the corner of a jailbroken Apple tv.
7) now run latest version of ATVFLASH. should work.
so about an hour and you are up and running again. PITA but functional. oh forgot. now you need to load up all the software and configurations you had done before. another hour of your life lost, to fix a problem with ATVFLASH and the latest version 1.4 I believe.
am also blaming myself for upgrading, as these things always fail. upgrades should wait for at least a month. or just not do them.
Firecore can I have two hours of my life back please? I am worth $20 per hour, so can you extend my license a year then?