That doesn't sound good. The factory reset should have formatted the partition and created the .kobo directory, the database and several other files. The directory is hidden if you are using a Mac or Linux system.
The only thing I can think of is that the internal SD card is failing. You could try creating the directory and putting an empty database on the device. There is a post somewhere here with a link to the database. Alternatively, you can open it and restore a disk image to the card or a new card to see if that fixes it.
Or, you can use this as an excuse to upgrade