It took a couple of attempts, with the O2 guy on the line, but basically it was a proper hard factory reset - going in to the root menu and doing a reset from there, not the soft factory reset that is instantly accessible on the phone. By Hard Reset, I mean power off, and then power on with the volmue down button pressed until you get to the hidden menu/routines.
Once I had done the reset, I then still had some WiFi issues and had to play about with internet access using 3G initially and then toggling the WiFi on/off button - got it working eventually. Seems that there may have been a glitch when I downloaded the update and I couldn't switch WiFi on, even though it was indicating as on, it was not receiving any signal.
Good luck - it will work, but you may need to do the hard reset a couple of times and keep testing it.
Hope this helps?
Cheers
Per