I had this problem, you need to do a nand flash erase:
(hold down D+M when entering menu, go to menu page 3/3 and choose option 7. Extra Menu and choose NAND Flash Erase)
Then you need to do a NAND Flash Restore with the conics image. Make sure all the files are on a FAT16 formatted CF card and in the / folder on the CF card.
EDIT: Got the keys wrong at the top, please note to get into the service menu it's D+M aka Developer Menu, not D+B aka Developer Boot).