[richarme]

Just a guess, but I would assume the term factory reset referred to clearing user settings before devices commonly had firmware update capabilities. So the legacy name should not be used to imply how the function should work in relation to firmware downgrade.

[catalogia]

It should restore all writable storage to factory configuration. It shouldn't matter a whit whether that storage has code or config on it.

[fomine3]

Who pays for more EEPROM/Flash capacity to save factory firmware?