Resetting to Factory Defaults
From http://en.flossmanuals.net/XO/HowToFlash
Warning: EVERYTHING on your XO will be deleted if you use a USB storage device and the following method to reflash your XO's flash memory.
With Internet connectivity, you can prepare yourself to reflash (restore) an XO to its factory-default settings. This procedure is called a "clean-install" and is described in more detail athttp://wiki.laptop.org/go/Clean-install_procedure. (Software updates can be delivered by clean-installing or by other means.)
Clean-installing works by completely reformatting your XO with a software image stored on a USB storage device.
You will need:
You will then load two special downloaded files onto your USB storage device. After that, the reflashing process takes about ten minutes.
You have now prepared yourself to restore the factory-default settings which are current at this time.
Next, hold down all four gamepad keys above the power button, and then push the power button to turn the XO on. You will see a message that tells you to "Release the game key to continue". Do not continue until you see this message. If you see a "Bad hash at eblock #0" message while reflashing your XO, then it means the image you copied to the USB storage device is corrupt. You should repeat the preparation steps, perhaps with a different USB storage device, and then retry the reinstallation step.
After you become comfortable with the procedure for restoring your XO to its factory-default settings, you might decide to change, upgrade, downgrade, or altogether replace your XO's operating system. There are several ways to accomplish this goal, all of which are discussed athttp://wiki.laptop.org/go/Change_your_OS. Some of these mechanisms (such as olpc-update and others) may be more bandwidth-efficient and easily undoable.