sorry to hear
yes, the operating system with Mochi is stored on the NAND flash memory.
a WDTV Live Hub in working condition will still function even without the internal hard drive connected (there will be an error message stating the hard drive is not connected … but pressing “ok” button on the remote control will cancel the message and the WDTV Live Hub will continue to function as per normal)
Have you tried inserting a USB Stick with “Rollback Firmware” on it ? … dunno if it will make any difference, but worth a try