Could you take it back to a Borders and ask them to reboot it to the factory settings for you?
Mine got stuck in a similar loop I reckon and it drained the battery - sounds like a very similar problem.
I went to the Borders in Melbourne Central, where they were very helpful. They were going to replace it for me if I had wanted them to. The Kobo staff were also very helpful. It didn't matter that the Kobo was flat as a tack and gone troppo!
Any hoo, I hope you get a positive outcome whatever you decide to do.
Last edited by mamasue; 11-11-2010 at 07:57 PM.
Reason: to add stuff
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