I found that whenever I reset to factory default settings nothing seemed to happen. However, I discovered that something more was going on than I had first realised. I changed my own desktop picture back to the default by selecting the “Mochi” theme, removed all the network shares in My Media Library, and disabled the Media Library. Then I did a factory reset and… my desktop picture was back, the network shares had been reinstated, and the Media Library was turned on again. In other words, the box had somehow saved my settings as the factory settings. It is clear that these settings and/or internal software were corrupt: causing problems like not being able to use/modify My Favourites, so I was unable to resolve the problem. I contacted support by telephone and they were very helpful. After we had been through all I had done they told me that my box needed to be replaced. As it was still under warranty and I bought it from Amazon I was able to arrange a replacement; I didn’t want a refund because I still believe this is a cool piece of kit. As I have come to expect, Amazon were very efficient in the replacement process and I had a new box the next day. I put my old box in the packaging they sent, printed off a returns label, and took it to a local “Collect+” centre.
WD support said that if I was unable to get a replacement from Amazon they could arrange for a replacement. However, it would be a refurbished box. Personally I would have had no problem with that, but I was fortunate.
Obviously I have no idea what caused the problem, but I’m up and running again and very happy.