Help! - Apple TV Software issues

I got an Apple TV last night. 3rd Generation 1st version.

It was working fine until I updated the software. The Apple logo came up after rebooting, the screen goes blank, then the TV says it doesn't recognize the signal (it's a two year old Sony LED).

So I followed the instruction manual for a system restore. Plugged it into the iMac and iTunes (10.6.3) says "iTunes has detected an iPhone in recovery mode...". I continue with the restore. The Apple TV reboots and we go right back to "iTunes has detected an iPhone in recovery mode..." and the fast flash on the indicator light. Gone through the loop three times now with the same outcome.

Anyone have any ideas?

 

Okay. Never mind. Turns out an Apple TV connected to iTunes by USB is always in restore mode. I took it back up and connected it to the TV and everything was fine.