Reset only resets preferences.
Manually reinstall the firmware. Don’t install the updater since there won’t be any more updates–just download the All Regions link for your hardware version (1 or 2), unzip, drag Fuzea.bin onto the Sansa Fuze driveletter and it will reinstall the firmware after you disconnect.
http://forums.sandisk.com/t5/Fuze/Sansa-Fuze-Firmware-Update-01-02-31-amp-02-03-33/td-p/139175
Of course, it could also be a mechanical problem with the Hold switch, but this is worth a try.
