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My question for you would be: do you have anything for your Reader to do in recovery mode?
If I try to do a recovery boot without either a microSD card with the rescue image on it in the reader, or a root package waiting to the be executed on the internal storage partition I get exactly the behaviour you describe.
As I understand it (which isn't necessarily 100% correct I must admit) the PRS-T1's recovery mode isn't exactly a fully integrated separate start-up mode. Instead it just tries to load a different firmware image and/or execute a script left for it. If you have no rescue mode firmware image on the microSD, and no root package script in the internal storage there is nothing for the recovery mode to do with your reader. So it either reboots to normal (after you release the buttons) or keeps trying to find the script and failing (while you keep holding the buttons).
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