Funny!
Maybe I was right at the very beginning.
Check my first post, message 2.
Try the resetting procedure several more times. Maybe the password gets reset.
Check if the fan is rotating. Maybe there is a bad connection to the fan.
If not successful,
You can buy a LS-CH1.0TL-R for $70.00 at ebay, maybe the better idea.
Or you can try a real reset procedure (maybe just for fun) but be aware that something can go wrong and you could end with a brick:
Disassemble the unit, check: http://www.yamasita.jp/linkstation/2008/11/081112__disassemble.html
Attach the disk to a PC (Windows is OK), and delete all partitions in the disk. Connect the disk back (do not assessable until the unit is flashed)
Do a TFTP boot as described in the FAQ, and do a new firmware update.