I know exactly what you are talking about. This is what happened the first time I tried to factory restore it. However, I was successful the second attempt.
I just tried it again this morning, per your advice. Here is what I did.
1. Pulled out on the lower set button, observed the LEDs on the switch turned off, and the switch was no longer operational.
2. Waited more than 10s and then using the tip of a knife I pressed the button all the way in and held it. It beeped once, I continued to hold it for about 10s.
3. I released the button and then it beeped twice and the LEDs turned back on.
4. I observed the switch no longer made a beep when I pressed the on or off button, and it no longer controlled the scene it was in.
Based on this behavior it would seem that the switch was successfully reset, would you agree?
I then did a restore device from the admin console. After this it controlled the scene it was in fine, but the beep on button press is back. It would seem that something the ISY is writing to the switchlinc is causing it, because prior to restoring the device, it does not beep.