Anyone else notice on-screen pointer jerkiness after applying the online update (version 2.0u)?

My console is brand new (just shipped 1/1/07) and when I was first setting it up the pointer was silky smooth. In fact I was surprised because it was smoother than my brother's this past weekend.

After setting up the net connection it grabbed an automatic update and now the movement is jerky and changing the "sensitivity" has no effect for the issue. Basically if I move the pointer back and forth or up and down in an empty space it will stutter even though I'm moving my hand very slowly and smoothly. At times you can almost see two pointers on the screen at once (like the hand is bouncing quickly between two places).

The difference between what I'm seeing now and when I first started up the console is night and day.

Is there a way to do a factory reset?