Stuck on "insert a USB drive with firmware to recover your WDTV"

you downloaded Gen 3 WDTV Rollback Firmware

your device is a Gen 2 WDTV … so that’s not gonna work

the only firmware available for your device is here: https://support-en.wd.com/app/products/product-detail/p/189#WD_downloads

oddly, they released another version firmware in 2013 (FW 1.06.42_B) … but no download links on the WD Site ? … oh well, should be out there if you google it.