The paper clip button is 'squishy' (as long as you are firmly pressing into the hole it should be activated) and only needs to be held down for a moment after the power is turned on. I'm not sure what could be happening with the recovery mode, but it might be helpful to try a direct ethernet connection into your computer and see if it comes up in Emote. We'll look into this issue further.
Regarding your initial problem of feedback, what does your physical and virtual (Emote) routing look like? Booting up with just the Network key held will do a 'soft reset' that should clear any routings made internally, this may help narrow down the problem. (It will also clear network settings, so you'll need to use the Access Point or use an ethernet connection)
