I don't think the Kindle has a proper factory defaults reset that includes a clean filesystem. So, I wouldn't expect that to work. If that was the case, then the several threads asking for help to recover a Kindle wouldn't exist. (or at least they'd be very short
)
Someone please correct me if I'm wrong.
If an update fails, the best thing I can think of would be to uninstall any additions you've put on it and either wait for another update attempt or go download and run the update manually.