It sounds like the firmware upgrade didn't work like it should have.
As Joe said, you should try a reboot first, but if that doesn't work, do a factory reset.
To reboot it: Hold the slider to the right for 3-4 seconds to force a shutdown.
Then turn it back on again by sliding the power button so you see the light blink blue (and then green) again.
(You can also reboot by pressing a paperclip into the hole on the back of the Kobo Touch.)
If that doesn't work, you can restore the device to it's factory state.
This will clear the device's memory, and yes, you'll have to redo the Kobo setup
Anyway,
to do a factory reset:
Hold down the silver 'home' button.
While holding, push and release the power slider quickly. If the factory reset is successfully initiated, the top light will turn red. (and later a blinky white)
If unsuccessful with the first attempt try again until you get a red LED.
I hope that helps!